AFUE (Annual Fuel Utilization Efficiency) is the share of a furnace's fuel that actually becomes heat in your home. A furnace with 90% AFUE turns 90% of the fuel it burns into warmth, while the other 10% escapes up the chimney. The U.S. Department of Energy sets the test that produces this number.
For a buyer, AFUE is the best single yardstick for a furnace's running cost. A higher AFUE means more heat for every dollar of gas or oil, so the difference shows up on your winter bills. Replacing an old 70% furnace with a 95% model means roughly a quarter less fuel for the same warmth.
Furnaces fall into three tiers. Older, low-efficiency units run 56% to 70% AFUE. Mid-efficiency furnaces, which vent through a hot metal flue, run 80% to 83%. High-efficiency condensing furnaces — which add a second heat exchanger (a part that pulls extra heat from the exhaust) — reach 90% to 98.5%. Condensing units cost more up front and need a drain for the water they produce.
A rule change is coming. Today the federal minimum is 80% AFUE. The Department of Energy has finalized a standard requiring 95% AFUE on new residential gas furnaces built after late 2028, which in practice means condensing technology. If you are replacing a furnace now, a 90%-or-higher model keeps you ahead of that change and trims fuel use from the first winter.