How HVACR Contractors Can Adapt to Declining New Installation Sales

For more than a year now, new residential HVAC equipment sales in the U.S. have been in a steep decline, a rare event in the ever-growing HVAC market. 

Virtually all major OEMs have seen their new equipment sales drop 20-40% compared with 2024. Contractors in every part of the country are reporting the same thing: Sticker shock, increased regulatory complexity, and higher financing costs have combined to push homeowners toward repairing their old units rather than replacing them with new ones.  The average American household simply can’t afford it.

For residential HVAC contractors, this shift represents something bigger than a slow season. It marks a structural change in how they pursue topline revenue over the medium-term future. The companies that can adapt quickly will be the ones still standing, and thriving, in 2026 and beyond.

New Equipment Sales Won’t Recover Any Time Soon

The slowdown in new equipment sales did not come out of nowhere. Multiple economic and regulatory pressures have converged to make system replacement harder for homeowners to justify, even when their older unit fails.

For example, A2L refrigerant requirements have pushed manufacturers to redesign systems with additional safety technology, driving up production costs. Combined with SEER2 efficiency standards, most in-place split system components can no longer be replaced independently. A failed 2017 condenser, for example, now forces a full system changeout to remain compliant, which naturally comes with a far higher cost.

These changes have made equipment warranties problematic. A warranty may cover a new condenser, but not a compatible air handler, line set, or other required components, leaving homeowners facing a $10,000-plus bill even for a fully “covered” failure.

Now factor in much higher interest rates for financing, confusing and difficult to obtain rebates, and widespread refrigerant uncertainty. For most households, the math simply doesn’t work. New equipment costing $12,500-$20,000 cannot compete with a $500-$1,500 repair or a more thorough $3,500 “retrofit” that gives the contractor more revenue at a higher margin, and the homeowner a longer-term fix.

Indicators across the industry point to a sustained, not necessarily cyclical, shift. Install volumes have fallen for multiple consecutive quarters, while parts sales and repair demand continue to rise. The repair vs. replace mix is changing, and it’s likely not changing back anytime soon. Fortunately, this change can be a source of real opportunity and clear competitive advantage for contractors able to pivot and adapt.

Service and Maintenance Calls Are The New Engine For Revenue

For HVAC contracting companies, the future lies in first-call resolutions, repair and retrofit expertise, and having a clear playbook on how to sell higher-margin retrofit solutions. To win in this changing landscape, contractors must empower their service technicians with easily accessible technical data and the support needed to flourish in a “fix-it” and “make-it-better” environment.

The problem for most contractors is cultural… and more importantly, it's technical. Techs have been taught for decades to push the new installation option(s) as the best solution, and, as a result, sales skills have been put ahead of technical skills. Most technicians now need a refresher course and technical support on how best to service and bring new life to aging equipment, a skill that used to be coveted by HVAC technicians.

For technicians to ramp up their repair skills, they need real-time access to equipment-specific tech support that can guide them from diagnosing the issue(s) to troubleshooting and repairing. This support needs to be instantly available and connected to brand-agnostic technical data, including age, key specs, manuals, wiring diagrams, part specs, part lists, and compatible replacement part options. 

Today’s techs have the benefit of being connected to unique AI platforms that have been trained specifically to diagnose and troubleshoot HVAC equipment. They also can gain access to historically hard-to-find technical data, including which parts are compatible with any given model. The techs who are given access to this type of data and support are far more likely to become highly proficient at performing repairs, getting them right the first time, and avoiding the margin-killing callbacks.

As technicians become empowered with technical data and support, they become capable of performing even complex repairs and sophisticated retrofits. However, they will also need to be taught how to sell a more comprehensive retrofit versus a simple repair while communicating to the homeowner the value of a retrofit system with its increased efficiency and extended longevity, saving the homeowner substantial money. 

Everyone wins: the customer with a system upgrade for a fraction of the cost of new equipment, and the contractor with a net margin that in some cases can exceed that of a new installation when properly executed.

How Should HVAC Contractors Adapt?

Today’s small and mid-sized HVAC contractors don’t need to blow up their existing business model, but they do need to evolve it.

The first step is to reorient technicians toward repair and retrofit sales. Most real service techs prefer fixing things over performing new installs anyway. To equip them for success, give them:

• Retrofit options priced attractively in the company price book;
• Clear value props to offer homeowners; and
• Tools that boost diagnostic confidence.

Remember, retrofit jobs often deliver higher margins than new installs and present strong value to customers now facing $20,000 system replacements.

About those diagnostic and support tools: Software solutions that unify guided tech support with model data, manuals, diagnostics, and parts compatibility are no longer a luxury. They are essential for maintaining profitability in a service-centered world.

Finally, contractors must ensure sufficient real-time, on-the-job training, particularly for younger techs. Technicians no longer have years of mentorship available. AI-driven diagnostic guidance, based on real support calls and equipment failures, gives techs confidence and accelerates skill formation.

Adapting to The New Normal in HVAC Contracting

New equipment sales aren’t going to rebound any time soon, but service and retrofit jobs can move from their “loss leader” status to a stable, durable source of high margin revenue. That’s only if contractors modernize how they diagnose issues, train techs and structure their service offerings.

The market is changing, and many of those changes are likely to be with us for many years. The contractors who adapt will own the next decade of HVAC service.