Jojo, I'm just a homeowner - not a pro. That said, I live maybe an hour from Baltimore in Rockville, MD. Last year I replaced my 1980s vintage A/C unit and my 1973 Oil Furnace in my 2100 Sq Ft Colonial home. I did a lot of research, including making a pest of myself here. :-) I ended up getting a Heat Pump and a 80% eff Oil Furnace. I think very few folks here would advocate installing an oil furnace in new construction if, say, gas were available. Also, staged electric backup to a heat pump in a new installation may be appealing, depending on climate. My new heat pump is much more effective in keeping my house cool during the summer and also it is much more efficient and thus uses less electricity during those summer months. Being a heat pump, I now have the option of using the heat pump to heat during the winter as opposed to using oil. (I use oil only when the outside temp is below 30 degrees.) My electric usage during the winter is down a lot from previous years, and with the mild winter so far I have used less than 50 gallons of oil. Some expenses that I would have incurred if I had changed from oil to staged electric as the heating backup include: 1) Increasing my electric service to accommodate an additional 15Kw of load. 2) Running the electric cabling needed to deliver the 15Kw. 3) Remove the basement oil tank and contents in an environmentally safe manner per local code. I have absolutely no regrets with my decision to keep oil as a backup - either comfort wise or economics wise. Again if I were building a new home I would hope for a heat pump with gas or electric as backup, depending on climate. PS Gas is/was not available at my location.

Since it is obvious you have doubt about both diagnosis and charge for his services, then get second opinion from a Trane dealer. IMO

mikec I am attaching a fuel comparison calculator which can be used as fairly close guide for potential fuel savings of HPs vs oil. Plug in the numbers. You will note that even straight electric baseboard heat is significantly lower than oil but HPs really offer significant savings. Assuming you are sized correctly, I would estimate conservatively savings of at least 50% over oil.That would be a very quick payback. If you are only planning to be in home for up to 10 yrs and would not do geothermal until the following heating season, then I think your choice is fairly easy. Go with a properly sized XL15i HP. Really you can not afford to pass up the potential savings of a conventional air-to-air HP or GEO by postponing your decision. Why? Money down the drain. And one final thought. You could also pair Am Std Heritage 15(same as XL15i HP) with the air handler you have which gives you a little more flexibility and possibly a better price. Even with a small backup heat strip with a HP to extend heating range would still offer good savings. Ductwork will need to be looked at if you go up from four ton to five ton. If GEO, you better act quickly. You have some good choices with good savings potential. IMO Good LucK! Here is a link that might be useful: Fuel Comparison Calculator

@ Saltidawg: I do see your point... I suppose yearly maintenance is not that big of a deal, and it would be a good idea to have a yearly tune-up/inspection with any type of system anyway. Perhaps "maintenance" is not the right term for all my concerns... it's also the "inconvenience" factor, having to rely on deliveries and worrying about the tank running dry. I know that can be avoided by coordination with your oil delivery service, but I don't like getting on automatic fill-up plans when fill-ups cost so much. (If just using oil as back-up, it would be less of a concern though.) I'm also thinking about long-term costs, such as if the furnace ever had to be replaced (I'm guessing that would be 4-5K?), or if the oil tank had to be replaced (I'm guessing that would be about 2K?). My furnace should be ok for a while, but the tank is 60 years old, so I feel like I could have problems with it. If I consider keeping oil, I suppose I should have the tank inspected. It also has a broken gauge so that should be fixed too. (If I just got rid of the oil, I could avoid that.) It's about about $3,000 more to go with HP with electric back-up than HP with oil back-up. The additional cost isn't just for the electrical upgrade... it also includes going 15 SEER vs. 13 SEER, additional equipment and labor, and removal of oil tank. I would have a higher SEER, sufficient electrical power if it's ever needed for anything else in the house, the tank out of my house, never having to worry about it leaking... also approx. ~20%-ish saving over oil back-up heat if oil stays at $4/gal, potentially more if oil prices go higher. $3,000 isn't a trivial amount, but I feel like once that conversion is done, all you ever have to worry about is one system, the heat pump... no oil furnaces, no oil tanks... so over time, I feel like money would be saved. (Correct me if I'm wrong... an HP with oil back-up should have about the same lifespan as HP with electric back-up, shouldn't it? There's additional electrical components to worry about, but I feel like it's usually the compressor that craps out over time, and compressor usage would be about the same either way, wouldn't it?) That being said, you do have some good points, and I will take them into consideration. If my oil tank is ok, maybe it isn't worth the extra 3K at this time to get rid of oil. If it's not, well then I'd rather take the 2K that would have to go to replacing the oil tank, and put that towards getting rid of oil. @ david_cary and weedmeister: Thanks for the info. I'm still a little confused about actual percent savings, but I think if I'm going to go through with this, it would be ideal to go with a 15 SEER, which I may not be able to do that if I keep the oil. Since my current A/C unit is 10 SEER, I think I would save a decent amount on A/C bills with 15 SEER. (I wish I knew how much of my electric bill actually goes to A/C and what goes to other stuff, but I don't really have a way to tell that.) @ cindywhitall: HP with oil back-up would not have electric back-up strips. If the oil craps out, then it would come down to repairing/replacing the oil furnace, adding electric back-up later, or adding some other back-up later. If I wanted to keep oil AND add electric back-up also, it would cost more than the current higher cost route, and I'm not sure it would even be possible. Oil prices to me seem a lot more unstable than electricity, but that's anybody's guess. Yes, I know I need to make a decision soon, before it gets cold. I know I can easily get through until mid-to-end October without heat, but not beyond that. My electric bill doesn't have the costs on one line either... I added up all the "per kwh" usage charges, and that's where I got the $0.114. My August bill was for acutal usage of 1903 kwh. Does your bill have gas on it too? (BGE puts electric and gas both on the same bill, but since I don't have gas, my bill only includes electric.) I don't know how NJ's rates are, but MD (BGE) did have a pretty big price increase around 2007/2008... however, since then electric rates have come down every year. I use an alternate supplier for additional savings. Rates are only guaranteed until May 2013, and they'll be announcing future rates this fall. My winter rates with the alternate supplier are the same as summer rates. FYI - I am female. My husband doesn't think it's necessary to do an HVAC upgrade, so that's why I'm looking into it. He thinks we should either use only wood and spaceheaters (which we did last year and was AWFUL), or get some oil, but try to make one fill-up (~250 gal, $1000) last all winter, which is unrealistic. Besides the oil issue, we have some other HVAC issues that really should be addressed (we should have some additional ductwork, the A/C doesn't work well on the 2nd floor, etc.), so I think it's really necessary to do something NOW. @mike_home: As mentioned, the tank is one of my concerns, being 60 years old. I wouldn't buy (another) house with all oil either, and if I could go back in time, probably wouldn't have bought this one. BUT - I can't change that now, so here I am :) SO WHERE I AM RIGHT NOW: I know oil alone for heating is not a good option, and something really should be done. I still need to get some more estimates, and I'm honestly not sure yet about keeping the oil as back-up or not. I don't see a big advantage to keeping oil, except less up front cost, and the off chance that oil prices could go lower one day (which I don't ever see happening). I could keep the oil as back-up now and look into other back-up sources later. I don't think we'd really need MUCH oil for back-up... I'm not looking for a toasty 75 degrees... more like 65 degrees most of the time is good enough. We also have the wood stove too. The only drawbacks to keeping oil are that we may only be limited to 13 SEER, and I'm worried about the condition of the oil tank... also it's a good time to remove the 60 year old tank NOW while it's empty... so it's a tough call. No one has commented on geothermal, but I may look into that too... doesn't hurt to get an estimate, right?