HVAC contracts

Furnace, A/C and Hot Water Tank: Should You Rent, Lease or Buy?

As a Realtor working with homeowners in Mississauga, Oakville and Burlington, I keep running into the same problem. Homeowners often don't know the financial arrangement they have on their furnace, A/C unit and hot water tank, and in many cases it's a real shock when they find out what they actually signed up for.

My last two transactions involved exactly this issue, one on the selling side and one on the buying side. If you're thinking about replacing a furnace, air conditioner or hot water tank, or you're about to sell or buy a home, here is what I want you to know before you put your name on anything.

Rent and lease are not the same thing

Many heating and cooling companies, and their salespeople, use the words "rent" and "lease" interchangeably. They actually mean two different things.

Think about a car. When you rent a car, you take it for the weekend or a few days, then you return it and hand over the keys. When you lease a car, it's usually for a fixed period, such as 36 or 48 months. At the end of the term there's a buyout price if you want to keep it.

Heating and cooling companies use the same words, but in my experience the salesperson often doesn't mention that there is a buyout price, or a penalty if you cancel the contract before the end of the term. That part gets skipped or glossed over, and the homeowner finds out years later, usually at the worst possible time: when they're selling or buying.

The part that gets skipped: buyouts and cancellation penalties

A monthly payment of a couple of hundred dollars can feel manageable. What matters is the total you'll pay by the end of the term, plus what it costs to get out early.

Here is a real example reported by CTV News. An Ontario buyer paying $187.61 a month for a rented water heater and air conditioner learned the previous owner had signed a 15-year contract, and the buyout was $17,000 (CTV News). Over 15 years, those monthly payments alone add up to roughly $33,770, before you even count the buyout. Your terms will be different, but that's why you need the full numbers up front.

You may have heard that Ontario changed the rules on liens. In June 2024 the province stopped companies from registering new Notices of Security Interest (NOSIs) against home titles for consumer goods like these, and existing ones expired (Steps to Justice). That's good news, but it deals with liens on title. It doesn't erase the contract itself. If you rent or lease, you can still owe monthly payments, and a buyout if you cancel early, so your lawyer should still review it.

Why buying usually beats leasing

I've done the math, and my calculations confirm it's better to purchase a furnace, A/C unit or hot water tank outright than to lease. By the time the contract is finished, you'll have paid considerably more by leasing than you would have by buying.

You can check this yourself in four steps:

1. Multiply the monthly payment by the number of months in the term.
2. Add any buyout price, early-cancellation fee and annual increase.
3. Compare the total with the all-in purchase price, including installation.
4. Ask yourself how long you plan to stay in the home.

What to compare	Rent or lease	Buy outright
Total cost over 10 to 15 years	Monthly payments x months, plus any buyout	One purchase price, plus any repairs
What you own at the end	Often nothing, unless you pay the buyout	The equipment
If you sell the home	Buyer may need to assume the contract, or you pay it out	Equipment stays with the home
If you cancel early	Penalty or buyout may apply	Not applicable
Repairs and servicing	Sometimes included, check what's covered	Your cost, or a separate warranty

A lease can sometimes include service or repairs, so make sure you weigh that fairly. Just weigh whatever is included against the total you'll pay.

Questions to ask before you sign

If you decide to lease, ask the salesperson these questions and get the answers in writing:

1. Is this a rental or a lease, and how long is the term?
2. What is the buyout price, today and at the end of the term?
3. Is there a penalty or fee if I cancel before the end of the term?
4. Do the monthly payments go up over time?
5. If I sell my home, can the contract be transferred to a buyer, and is there a fee?
6. Who owns the equipment when the term ends?
7. What is the total I will pay over the full term?

If the salesperson can't answer clearly, or avoids the question, that tells you something.

Get at least two quotes, because you may not need to replace anything

Before you decide anything, get at least two separate quotes from different heating and cooling companies. Who knows, you may not even need to replace anything. A second opinion may show that a repair is all you need. Ontario also restricts companies from selling furnaces, air conditioners and water heaters door to door unless you invited them (Ontario.ca), so be cautious about anyone who shows up uninvited with an urgent warning.

Selling a home in Mississauga, Oakville or Burlington

If you're selling, find out what you have before you list. Pull out any contracts for your furnace, A/C and hot water tank, call the company, and ask for the buyout figure in writing. Tell your Realtor and your lawyer.

In Ontario, equipment that is rented or leased is normally listed as a rental item in the Agreement of Purchase and Sale, and the buyer assumes the contract if the agreement says so. Your equipment needs to be described accurately. Surprises discovered close to closing can delay the sale, cost you money, or cause friction with the buyer. I've seen it happen, and it's avoidable.

Buying a home in Mississauga, Oakville or Burlington

If you're buying, ask for copies of any rental or lease contracts before you make an offer, not after. Read the rental items clause carefully and have your lawyer review the contract. Find out the monthly cost, the term and the buyout price, and factor them into your budget and your offer.

This applies to resale homes in established neighbourhoods and to newer builds, where a builder may have arranged equipment rentals before you ever see the home. Ask early so there are no surprises on closing day.

Talk to me before you sign

Whether you're replacing a furnace, A/C or hot water tank, or getting ready to sell or buy in Mississauga, Oakville or Burlington, I'm happy to help you think it through. If you'd like, I can also share the names of heating and cooling companies I trust.

Call or text Dave at [phone number], or send a message here. Thinking of selling? See how I help sellers. Buying a home? Learn how I help buyers.

FAQs

Is it better to rent, lease or buy a furnace, A/C or hot water tank in Ontario?

In my calculations, buying outright costs considerably less than leasing by the time the contract is finished. Run your own numbers by adding up every payment, any buyout and any fees, then compare the total with the purchase price including installation.

What happens to a rented water heater or furnace when I sell my home in Mississauga, Oakville or Burlington?

It depends on your contract and your Agreement of Purchase and Sale. The buyer may assume the contract, or you may need to pay it out. Get the buyout figure in writing before you list, and tell your Realtor and lawyer.

Can I cancel a furnace, A/C or water heater lease early?

Sometimes, but there is often a penalty or buyout price. Ask the company for the exact figure in writing before you decide. If you signed after an unsolicited visit at your door, contact Consumer Protection Ontario, because Ontario restricts door-to-door sales of these products.

Can a heating or cooling company still put a lien on my home?

Since June 2024, Ontario has not allowed new Notices of Security Interest on home titles for consumer goods like these, and existing ones expired (Steps to Justice). The contract itself still applies, so you can still owe payments or a buyout. Have your lawyer review it.

Do I really need to replace my furnace or A/C?

Not necessarily. Get at least two separate quotes before deciding. You may find that a repair is all you need.

Do you work with buyers and sellers in Oakville and Burlington as well as Mississauga?

Yes. I help buyers and sellers across Mississauga, Oakville and Burlington, including checking for rental items and contracts before a home is listed or an offer is made. Contact me and I can also share the heating and cooling companies I trust.