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96% Efficient Furnace on Second Floor

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I will be replacing my 17 year old furnace/AC with a 96% efficient one but my furnace is located in a utility room on the second floor. My concern is with how the installers are suggesting the venting be ran horizontally through the wall. I was doing some research and the vapors coming out are corrosive to vinyl siding. The existing furnace is still using the exhaust pipe straight up through the ceiling/attic and out the roof. That's being replaced with with double-layer(Not sure on the wording) metal pipe for the water heater. My question... is venting out the side of the house on the second floor correct or even code? Will it eat a way at my siding?

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