Home Improvement Skills & Specialties HVAC

Tankless Water Heaters: What to Know Before You Buy

Pros and Cons of Switching to a Tankless Water Heater

Tankless hot water system in the basement of a Green Technology Home
Mark Hunt / Getty Images

When a storage water heater tank isn't enough for the demands of a home, a tankless water heater can be the right answer. In homes where many people take showers or baths simultaneously, use large-capacity washing machines, and run the dishwasher, a tankless water heater helps solve the problem of hot water running out.

Tankless water heaters are also known as on-demand or instantaneous water heaters because they don't usually store hot water; they create hot water on demand. Unlike traditional water heaters with a large water storage tank that requires a lot of space, a tankless water heater doesn't waste as much space or energy. However, there are both pros and cons, as well as several types of tankless water heaters, and here's what you need to know before buying a tankless water heater unit.

How Do Tankless Water Heaters Work?

Tankless water heaters provide hot water only as needed, unlike storage water heaters with 50-gallon tanks always being heated on standby. Avoiding standby heat loss is primarily how tankless water heaters are more energy efficient. When a hot water faucet is turned on, cold water flows through a heat exchanger in the unit, using a natural gas burner or an electric element to generate hot water instantly.

Diagram of the Chronomite instant-flow tankless water heater.
Chronomite Laboratories, Inc.

Pros & Cons of Tankless Water Heaters

Consider some limitations and trade-offs before deciding if a tankless water heater is right for you.

Pros

  • Energy savings: According to the U.S. Department of Energy, if your home uses 41 gallons or less of hot water daily, demand water heaters can be 24% to 34% more energy efficient than conventional storage tank water heaters. If you use considerably more water per day, like 86 gallons per day, you will still experience savings in energy, but exponentially less, like 8% to 14% energy efficiency.
  • Longer lifespan: Tankless water heaters tend to have a lifespan of about 20 years, while conventional storage water heaters last about 10 to 15 years.
  • Smaller size: You can determine the size of your tankless system once you know the required temperature rise (desired hot water temperature minus incoming groundwater temperature equals temperature rise) and all flow rates for all the faucets and showerheads to be heated by the unit that may be on at one time. But, regardless of size, tankless water heaters are always smaller than storage water heaters and can be mounted in many small spaces, including closets, under sinks, pantries, or storage areas.
  • Wide range of features: There are both electric models and natural gas or propane models of tankless heaters. Some tankless units are sized to heat a cup of tea, while others provide enough hot water for two or more bathrooms.

Warning


A tankless water heater needs to be located in a spot that does not freeze, so they would not be advised for placement in an unheated garage or outdoors. They also need to be kept away from rain or splashed water.

Cons

  • Higher cost: Tankless water heaters are pricier than conventional storage water heaters. Still, tankless water heaters will typically last longer and have lower operating and energy costs, which could offset their higher purchase price.
  • Heating is dependent on groundwater temperature: Before buying a tankless water heater, you must consider the groundwater temperature of your region. The colder the groundwater gets, the less hot water can be produced by a unit for a given GPM flow rate. For example, a tankless water heater in Michigan needs to be 33 to 50 percent larger than in Florida to serve the same number and types of fixtures. The tankless Michigan heater has to work harder to warm the incoming cold water since the groundwater coming into the unit can be 30 degrees colder in Michigan (42 F) than in Florida (72 F).
  • Impact of flow rate: The slower the water flows through the unit, the more the water can be heated, so you'll have to make sure you have a faucet or shower fixture from after the Federal Energy Policy Act of 1992, which required all faucets and shower fixtures made in the United States to have a flow rate of no more than 2.2 GPM at 60 PSI.

Types of Tankless Water Heaters

Point-of-Use Tankless Water Heaters

The point-of-use tankless water heater is small and usually fits inside a sink cabinet or closet. They are typically dedicated-use heaters, meaning the unit serves one sink, faucet, shower, etc.

Point-of-use tankless water heaters are less expensive than whole-house units. They are good choices for some applications, such as when your standard water heater (with tank) is in good shape but does not have sufficient capacity to serve extra fixtures.

Examples of a whole-house and point-of-use tankless hot water heater.
Home-Cost.com

Whole-House Tankless Water Heaters

Whole-house units are much more expensive than point-of-use units. Whole-house units have higher GPM flow rate capacity and can handle the demand for more than one fixture at a time. For example, a unit may simultaneously run two shower fixtures or a dishwasher, kitchen sink, and bathroom hot water faucet. Remember, pre-1992 showerheads can use six times more water than a bathroom sink faucet.

The size and number of whole-house tankless water heaters you need will be primarily driven by flow rate, which is determined by the number and types of fixtures you may have run at once. You may need more than one whole house tankless water heater hooked up in parallel to meet your hot water demands, especially for simultaneous shower usage.

Example of an electric whole-house tankless hot water heater and its interior.
Stiebel Eltron

Electric

The heat exchanger can be an electric-resistance heating coil or a gas-fired burner. In an electric water heater, a metal heating element heats up when electricity passes through it, transferring heat to the water and heating it.

A drawback of electric systems is that electricity is more expensive to run than gas, although natural gas may not be widely available throughout the United States.

Gas

Gas units generally have more heating capacity, and larger whole-house units are typically gas-fired, using natural gas or propane. Gas-powered tankless units have a flow sensor that starts combustion. When the gas valves opens, gas enters the chamber ignited by a spark to produce flame, which heats the exchanger and, subsequently, the water. Unlike electric models, one drawback is that these systems require venting, according to the national gas regulations.

These systems come in condensing and non-condensing gas models. A condensing gas tankless model maximizes system energy by using a dual heat exchanger. Non-condensing models only have one heat exchanger. Condensing systems are more energy-efficient as less heat is lost when heating the water.

Solar

If you have a solar power system in your home, a tankless water heater can be connected to the home's solar energy system. Making the appropriate connections will cost an additional fee, but your unit will be powered by clean energy.

How Much Do Tankless Water Heaters Cost?

A tankless water heater is more expensive at the outset and costs $2,542 on average. Single-point heaters cost considerably less than whole-house heaters, while electric tankless heaters are also less expensive but can only heat a smaller volume of water efficiently.

According to Angi, units range from $1,394 to $3,806, with smaller electric tankless water heaters costing as low as $100 to $250. Several factors, such as the water heater's brand, type, and quality, impact your final price.

Installation should be done by a professional, such as a plumber, water heater installer, or HVAC expert. On average, experts charge about $50 to $200 per hour, depending on the project's scope and regional location. You can expect install costs to average between $600 and $1,850.

You may also qualify for tax credits when purchasing an ENERGY STAR-certified tankless water heater. The government also offers additional tax credits for solar-powered units. 

In the end, you'll save money — the average energy savings is at least $50 annually, usually more. The system and its installation will eventually pay for itself. And ultimately, it's a better choice for the environment.

 Tankless Type  Smaller Unit  Larger Unit
 Single point of use  $100 to $300  —
 Whole house  —  $450-$1,500
 Gas  $500 to $1,200  $900 to $2,200
 Electric  $100 to $250  $420 to $800
 Solar  —  $1,000 to $6,000

Conventional Water Heater vs. Tankless Water Heater

Conventional water storage tanks range from 30 to 60 gallons, with an average size of 50 gallons, roughly taking up a space at least 6 feet by 2 feet. Conventional systems cost considerably less ($600 to $2,500) than tankless systems that heat the same amount of water. Most homes already have water heater systems with tanks, so installation costs are much less for replacing a tanked water heater.

Replacing a home's water heating system with a tankless water heater makes the most sense when building new construction or considering a significant home renovation project. A tankless water heating system should also become a viable consideration if a conventional water heating system no longer meets the hot water needs of your home.

Conventional Water Heater
  • Least expensive option

  • Installation is less expensive

  • Constantly expends energy to heat large storage tank

  • Takes up a lot of space

  • Less environment-friendly

  • Lifespan is about 10 to 15 years

Tankless Water Heater
  • Comparitively expensive

  • Pricier to install

  • Saves money in energy expenditure

  • Small, space-saving option

  • Eco-conscious choice

  • Lifespan is 20 years

Tips for Buying a Tankless Water Heater

To make a smart purchase of a home investment like a tankless water heater, you want to go in with a plan for researching, comparing units, and making the best choice for your home.

Go In Store to Talk About and Compare Options

Going into a store or showroom to buy a tankless system lets you talk to a salesperson about the unit's space needs, warranty, and installation. Also, you might be able to negotiate the installation costs if you go to the store. Typical places to buy tankless systems include big box home improvement stores and water heater specialists.

Comparison Shop for the Best Price Online

Online shopping allows you to comparison shop for the best prices among many retailers from the comfort of your home. Online buying is the most time-efficient option for when you know exactly what you want.

Where to Buy a Tankless Water Heater

There are plenty of manufacturers from which to consider your new tankless water heater. The following are some of the manufacturers to check out:

  • AO Smith
  • Bosch USA
  • Bradford White Corp.
  • Chronomite Laboratories Inc.
  • Eemax, Inc.
  • Noritz America Corp.
  • Paloma Industries
  • Rheem Manufacturing
  • Stiebel Eltron USA
  • Takagi Industrial Co.

Make Sure to Get a Warranty

Ensure you get a long warranty with the option for an extended warranty. For example, one company (Noritz) offers a 25-year warranty for its tankless system. Read the fine print in the contract since certain circumstances, like commercial use, can reduce the warranty time.

FAQ
  • What is the main downside of having a tankless water heater?

    The main downside of a tankless water heater is the upfront cost and installation. It is more expensive than a standard storage water heater, but it will pay for itself over time.

  • What size tankless water heater do I need?

    The size of your tankless water heater will depend on several factors. Your tankless water system will need to be sized appropriately for your house's needs, the ground temperature in your region, and the power source (gas, electric, or solar) running to the system.

  • Is switching to a tankless water heater worth it?

    If you have high hot water demands and prioritize environmentally friendly solutions in your home, then the upfront costs of switching to a tankless water heater can be worth it. Plus, there are energy savings that will make the switch pay for itself over time.

  • How much maintenance is required for a tankless water heater?

    Similar to maintenance for a tanked water heater, a tankless water heater must be flushed once a year. If your area has hard water, consider cleaning it every six months to remove a potential buildup of mineral deposits.

  • How long do tankless water heater systems last?

    On average, a tankless system lasts 15 to 20 years, with some running up to 25 years or more. Comparatively, a conventional hot water system lasts, on average, 10 to 15 years.

The Spruce uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. Tankless or demand-type water heaters. U.S. Department of Energy.

  2. How much does a tankless water heater cost. Angi.