Are Tankless Water Heaters Worth It?

average cost of tankless water heater

Ah, the joy of a nice, hot shower. There’s nothing quite like it, is there? Unfortunately, the opposite is also true: nothing quite ruins your day like the shock of cold water cascading over you. That’s precisely what can happen if your water heater runs out of hot water or, worse, breaks down. 

If your water heater is beyond repair, then it’s time for a new one. But what kind will suit you best? Should you opt for the conventional model, or would a tankless version be better? It’s tough, we know, particularly if you have factors to consider, such as the tankless water heater cost, energy efficiency, and the like. 

We’re here to help. We’ll discuss the difference between a conventional water heater and a tankless model, the installation process, and other details that can affect your choice of a water heater. 

What is a Tankless Water Heater?

Tankless water heaters are becoming more and more popular nowadays and for good reason. They are a great alternative to traditional water heaters that use a tank. Instead of heating a tank of water and keeping it hot until it’s needed, tankless water heaters heat water as it’s needed, meaning you can never run out of hot water.

Tankless water heaters became available in the early 2000s, giving homeowners a new way to heat their water. They’ve since gained a following as they tend to be more energy-efficient than standard water heaters. That’s because they only heat the water on demand.

There are two types of tankless water heaters based on their power source – electric and gas. Electric tankless water heaters require electricity to operate, while tankless gas water heaters run on natural gas or propane. Electric tankless heaters are more energy-efficient and are ideal for homes with lower water demand. Meanwhile, tankless gas water heaters are suitable for larger homes with higher water demand. 

Whichever type you choose, a tankless water heater is a great way to save money on your energy costs. 

How Does it Work?

If you’ve always used traditional tank water heaters, you might wonder what makes tankless water heaters different. Well, a tankless system heats water on demand. That is, when you or someone needs hot water. So, instead of keeping a large tank of hot water ready and waiting, a tankless water heater only heats water when necessary and in the required amount. 

The way a tankless water heater works is simple. Cold water enters the unit and is pushed through a heat exchanger, which is heated by a gas burner or electric element. The powerful burners bring the water to the desired temperature, and when the water heats up, it goes to the showers and faucets throughout the house.  

At no point is the water stored in a tank. This fact is where a tankless water heater differs from a traditional tank heater.  

Most homes use traditional tank water heaters, which are basically large insulated tanks that hold about 30 to 50 gallons of water. The water is heated and stored in the tank, to be released when you turn on the hot water tap. Compared to a traditional model, a tankless version is much more efficient since it only uses energy when hot water is actually needed.  

Choosing the Correct Size

Choosing the correct size tankless water heater can be a little tricky. You don’t want to end up with a model that’s too small for your household’s needs, as you might not get enough hot water when you need it. On the other hand, one that’s too big for your needs can be a waste of energy and money. 

Two critical factors influence the sizing, and, in turn, how much tankless water heaters cost.

These are the following: 

Flow Rate

Measured in gallons per minute (GPM), the flow rate determines how much water the tankless unit can provide at a given time. Remember that tankless water heaters heat water on demand and do not store it. So it should have a flow rate sufficient for all the fixtures and appliances you want to use simultaneously in your home.  

The typical home requires about 5.5 to 7.5 GPM to meet the demand. But to be certain, add up the total GPM output of all the fixtures and appliances you run at the same time. Size your tankless water heater that meets or exceeds your water requirement.  

You can use the following appliance and fixture outputs as a reference. 

  • Faucet: 1–2 GPM 
  • Dishwasher: 1.5–2 GPM 
  • Washing machine: 2–2.5 GPM 
  • Conventional shower head: 4–6 GPM 
  • Eco-friendly shower head: 2–3 GPM 
  • Tub: 2 GPM 

Temperature Rise 

This refers to the difference between the coldest groundwater temperature and the temperature you set in your tankless hot water heater. To calculate the temperature rise, subtract the temperature of the incoming water from the temperature of the water you want from your fixtures and appliances.  

You can measure the water’s temperature straight from the ground with a thermometer. You’ll need a faucet located outdoors for this. Take note that this varies depending on the time of the year and where you live. 

Let’s say the preferred temperature of your tankless water heater is 120 degrees, and the coldest water temperature in your area is 50 degrees. The difference between the two is 70 degrees, which is the temperature rise. 

Here’s a guide on the average temperatures of some standard appliances and fixtures. 

  • Faucet: 110°F 
  • Dishwasher: 110°F 
  • Washing machine: 120°F 
  • Shower: 104°F 
  • Tub: 102°F 

Energy Efficiency

When you turn on a hot water tap in your home, cold water flows through a pipe into the tankless water heater. The unit has heating elements that quickly heat the water to the desired temperature. The hot water then flows out of the heater and through your pipes to the tap where you need it.

Because tankless water heaters only heat water as needed, they don’t waste energy by constantly keeping a large tank of water hot. Compared to conventional water heaters, tankless hot water heaters are about 8% to 34% more energy-efficient.  

The actual energy savings depend on your home’s water consumption. For households that use about 41 gallons of hot water daily tankless heaters can be 24% to 34% more efficient. Meanwhile, homes with high water demand (around 86 gallons daily) can expect their tankless hot water heaters to be 8% to 14% more energy-efficient than traditional models.  


Replacing an appliance can be a hassle, particularly if it’s something as vital to your daily life as a water heater. So if your old device kicked the bucket, or you’re purchasing a water heater for the first time, you’ll want to invest in one that will last you a long time. 

The primary point of failure with a water heater is the tank. During the heating process, the minerals in the water crystallize and settle at the bottom of the vessel. The crystals eventually cling to the heating elements. The buildup can lead to failure in the tank body, which can cause the tank to rupture. When this happens, the water heater needs to be replaced. 

Tankless heaters are still prone to corrosion from water, but the absence of a tank for water storage eliminates the possibility of tank failure. With proper maintenance, they can last twice as long as tank electric heaters, or about 15-20 years. Of course, the unit’s quality will also affect its lifespan. 

Types of Energy Sources

The country has various energy sources that power the needs of homes and businesses. As such, residential and commercial customers have several options for operating their tankless water heaters. Each energy source offers benefits and drawbacks, so what works best for your tankless system is up to you. 

Natural Gas

Many homes come with natural gas lines. Also, because it’s a cost-effective, efficient, and reliable power source, using it to run your tankless hot water heater is an excellent idea. 

When you turn on the hot water tap in your home, the tankless water heater’s sensors detect the water flow and ignite a burner to heat the water as it passes through the unit. This burner is powered by natural gas, which provides consistent and high heat output. 

Relying on natural gas as an energy source provides some key benefits. Compared to electricity, it’s relatively cheap. This means that running a tankless water heater on natural gas can lead to energy savings.  

Moreover, burning natural gas emits fewer carbon emissions than other fossil fuels, which is good news for the environment. It’s also readily available in many areas, ensuring a steady supply. 

On the downside, this fuel source is non-renewable. Additionally, it can be dangerous if it leaks.  


Like natural gas, propane is another popular energy source for tankless water heaters. It also powers the appliance the same way as natural gas. 

Turning on the hot water tap draws cold water into the tankless hot water heater. When you turn on the hot water faucet, cold water enters the tankless heater. The water travels through a propane burner that raises its temperature to the desired level before it flows out of your fixtures and appliances.

Propane tanks can hold a lot of energy in a small space, which means you can get a lot of use from a single tank. This is particularly beneficial for those who live in rural areas and don’t have easy access to natural gas pipelines. 

Propane also produces less greenhouse gas emissions and releases fewer pollutants into the air. This can be a significant advantage if you’re concerned about the environmental impact of your energy use. 

However, using propane as a fuel source can lead to higher energy expenses as it’s more expensive than natural gas. Moreover, propane tanks need to be refilled regularly. If you run out of propane, you won’t be able to heat your water until you get a new tank. This can be inconvenient, especially if you have a large household or use a lot of hot water.  


Electricity is the top pick as an energy source for tankless heaters and for good reasons. For one, it’s super convenient. All you need is an electrical outlet, and you’re good to go. No need to worry about gas lines or other complicated installation processes. Plus, since electricity is available pretty much everywhere, it’s a great option for homes that aren’t hooked up to a natural gas line. 

Another thing going for electricity is its efficiency. An electric tankless water heater is often more energy efficient than gas tankless water heater. This is because gas heaters lose heat through the flue, whereas electric heaters don’t have a flue and can therefore retain more heat. 

That said, electric tankless water heaters aren’t faultless. They have some drawbacks, and one of these is the higher tankless water heater cost. This is especially true if your area has inflated electricity rates. Additionally, an electric tankless water heater may not be as powerful as its gas counterpart. This would affect the amount of hot water you can get at one time. 


If you already have solar panels on your property, using solar power as an energy source for your tankless system makes sense. It basically involves connecting the tankless water heater installation to your home’s solar panel system. The connection process involves extra expenses. Still, the savings on your energy bill can offset the additional costs. 

A tankless water installation that runs on solar energy offers plenty of advantages, particularly if you live in an area with plenty of sunshine. First of all, solar power is a renewable energy source, which means using it won’t deplete the earth’s limited resources of fossil fuels.  

Another benefit is solar energy’s ecofriendliness. It doesn’t produce greenhouse gasses or air pollutants, which can help combat climate change.  

Lastly, after you’ve recouped your initial investment, you’ll get free electricity for the rest of the system’s lifespan. This means you can save money on energy bills since you won’t rely on traditional energy sources to heat your water. The main drawback of this power source is the acquisition cost for those who don’t have an existing solar energy system.

Also, solar energy needs plenty of sunlight to work effectively. This means you may need a backup power source when the panels don’t produce enough electricity for your tankless water heater installation.  

Tankless Water Heater vs. Traditional Water Heater

A hot water heater is a considerable investment for most homes. However, it’s also a necessity, so getting one is given when the old one gives up the ghost. Regarding a replacement, you might wonder whether to go for a traditional model or a tankless heater.  

A traditional water heater stores hot water in a tank, usually between 30 to 80 gallons. The heater keeps the water hot until you need it and then releases it when you turn on the faucet. In contrast, tankless heaters do not store water. Instead, they heat water on demand as it flows through the unit.  

Which one is right for you? Let’s compare the two types using vital factors. 


Traditional water heaters are generally cheaper upfront, having lower purchase and installation costs. Tankless heaters costs, whether purchase or installation, are higher than their traditional counterparts. This is because tankless units require a more complicated installation process and often necessitate electrical or gas upgrades.  

However, despite being more expensive to install, tankless heaters have a longer lifespan than traditional units, which can offset the initial investment. 

Energy Efficiency

Traditional water heaters are less efficient than tankless ones because they continuously heat and reheat water, even when you’re not using it. The constant heating uses more energy, making them more costly to run.  

Tankless water heaters, on the other hand, only use energy when you need hot water.   

Since they don’t store hot water, they don’t waste energy by keeping a tank of water hot all the time. This means you can save money on your monthly energy bills. 


A tank hot water heater has a large tank for storing water. Depending on the size of the tank, you might have to sacrifice valuable storage space or even an entire room to accommodate it. 

In contrast, tankless water heaters are much more compact and space-efficient. Because they don’t require a large tank to store hot water, they take up very little space.  


Tankless heaters are also known as on-demand water heaters because they provide hot water without delay. This means you don’t have to wait before showering or washing your hands. Hot water is available anytime you need it. Moreover, you get an unlimited supply. 

With a traditional water heater, you have to wait for the tank to fill up and heat up, which can take several minutes. Also, you only get hot water as long as there’s water in the storage tank. 

Benefits of Tankless Water Heaters

If you’re tired of waiting for ages for your shower to heat up, or if you’re sick of running out of hot water mid-shampoo, a tankless water heater might be for you. This type of water heater not only saves you time and frustration, but it also offers some pretty sweet advantages over traditional tank-style water heaters.  

Let’s find out why tankless is the way to go. 

You always have hot water

With a traditional tank, it takes several minutes for the water to reach the desired temperature. Moreover, when the tank’s empty, you’ll have to wait for it to fill up. Tankless heaters will take only several seconds to flush out the cold water from the water pipes before providing water heated to the right temperature. 

You’ll save money on utility bills

The average tankless water heater is about 20% more efficient than a traditional model. This means you’ll save on your energy costs. It may not seem like much, but the amount adds up over time, even up to a couple hundred bucks in a year. 

You help save the environment

Tankless systems cost more than traditional ones, but aside from saving you money, they help protect the environment, as well. Because of their efficiency, using them generates less planet-warming emissions than tank heaters.  

Tankless heaters tend to last longer

Tankless heaters don’t have a storage tank like traditional heaters do. Instead, they heat water as it passes through the unit. As such, there’s no standing water that can cause mineral buildup that leads to corrosion over time. This helps tankless models last about 20 years compared to the 10-12 years of conventional heaters. 

Drawbacks of Tankless Water Heaters

They may be energy-efficient, durable, and dependable, but tankless units come with some drawbacks, too. Let’s take a closer look at their not-so-great sides. 

They’re pricier

A tankless water heater costs more than a conventional one. But it’s not just the sticker price we’re talking about. Setting tankless systems up is also more expensive. That’s because they require a more complicated mounting process than traditional models. This can drive up the installation expenses. 

They sometimes provide inconsistent water temperature

One of the most common issues people encounter with a tankless heater installation is inconsistent water temperature. Tankless units don’t keep a tank of hot water on standby as traditional models do. Instead, they only heat the water when you need it. 

If you’re using a lot of hot water at once or running multiple fixtures at once, the heater might be unable to keep up with the demand. As a result, the water coming out of your tap might not be as hot as you’d like.  

They’re more complicated to install

A tankless heater installation is more complicated to put in place. For example, gas water heaters will need a dedicated gas line. Meanwhile, an electric water heater may necessitate upgrades to your electrical circuits to handle the higher power demand. 

Average Cost of a Tankless Water Heater

Unlike traditional water heaters that store hot water in a tank, tankless heaters heat water as it passes through the unit. This means you don’t have to worry about running out of hot water, no matter how long you shower.  

But, like most things in life, this luxury comes at a cost. Let’s see if the convenience of having unlimited hot water is worth the dent in your pocket.

Unit Cost

Depending on the model, getting a new tankless water heater will set you back several hundred or several thousand dollars. Some come with a $360 price tag, while the most expensive can go as high as $2,500. 

The GPM of the tank has the most significant impact on the price. The higher the capacity, the higher the sticker price of the unit. 

Installation Costs

The installation costs depend on a couple of things. First is on how long it takes the plumber to install the appliance and, second, on the plumber’s charges. Plumbers charge anywhere from $45 to $150 an hour, with the average being $85. Setting up a tankless system usually takes about 2-3 hours, which translates to $90 to $450.

Installing gas tankless water heaters cost more. Be prepared to pay as much as $1,200. Add about $500 to $1,000 more if you require a gas line. 


Aside from the plumber’s charges, you sometimes have to enlist the services of a carpenter to do drywall work. With an average carpentry rate of $75 per hour, carpenter labor should cost between $100-$300.

Supplies and Parts

In installing the tankless heater, the plumber might have to use fittings, connectors, mounting hardware, and other parts. That could add another $50 to the costs, depending on the brand and quality used. 


If you have an old water heater in place, your plumber may charge between $25 to $500 to remove and dispose of it properly. The cost varies depending on the rates in the area, accessibility of the tank, its size and weight, local regulations regarding disposal, and the like. 

Factors Affecting a Tankless Water Heater Cost

Not all tankless heaters are created equal. That’s why how much a tankless water heater costs can vary depending on several factors. Let’s understand what these are. 

Energy Source

If you have high electricity rates in your area, it can make your electric tankless heater very costly to use. The same holds for natural gas and propane tankless water heaters if the price of the said fuel sources are through the roof where you live. As such, it makes sense to choose a heater type that uses a fuel source that’s cheaper and more readily available for you. 

System Type

There are two main types of tankless water heaters: point-of-use and whole-house. Point-of-use tankless heaters provide hot water to a specific location, such as a bathroom or kitchen sink. These units are typically smaller and less expensive than whole-house models. 

Meanwhile, whole-house tankless water heaters are designed to provide hot water to an entire home. These units are larger and more powerful than point-of-use versions, and they can deliver hot water to multiple locations simultaneously. However, they are also more expensive than point-of-use units. 

System Size

The size of a tankless water heater is measured in terms of its flow rate or the amount of hot water it can produce per minute. Generally speaking, the higher the flow rate, the more expensive the unit. This is because larger models require more powerful components to handle the increased demand. 


Well-known and reputable brands charge a premium for their products because they have established a reputation for quality and reliability. This means you might have to pay more for a tankless heater made by a popular brand. In return, you can be sure you’re getting a high-quality product that will last a long time. 

On the other hand, lesser-known brands may be more affordable, but there’s a higher risk of the product being of lower quality or breaking down sooner. This doesn’t mean every unknown brand is terrible, but it’s essential to research and ensure you’re getting a reliable product backed up by good customer reviews.  

Condensing vs. Non-Condensing

Condensing tankless water heaters capture and reuse the heat usually lost through the exhaust. They do so by using a second heat exchanger to extract the heat from the exhaust gasses and transfer it to the water, reducing it to the point of condensation. They cost more, but they’re more energy-efficient. 

Meanwhile, non-condensing units only have one heat exchanger. As a result, it loses some of the energy through the exhaust, making it less eco-friendly.  

Tax Credits

Tax credits are a way for the government to give you a break on your taxes if you make certain purchases or do certain things. In this case, if you buy an Energy Star appliance, such as a tankless heater, you might be eligible for a tax credit. That’s because Energy Star-certified appliances are more energy-efficient than conventional models. 

Electrical Updates

Installing a tankless water heater requires a lot of electricity, so if your home’s electrical system isn’t up to par, you may need to make some upgrades. This could include installing a new electrical panel or upgrading the wiring and circuit breaker for the water heater.  

The cost of these upgrades will depend on the specific needs of your home and the extent of the upgrades required. In general, the more work that needs to be done, the higher the cost. 


Tankless water heaters only use energy when you need water. However, you’ll have to provide insulation, especially in an area with a cold climate. Failure to do so can lead to higher energy costs due to heat loss. Protect your tankless heater from the cold weather by insulating the external pipes. 

Gas Line Installation

Homes that don’t have a gas line should have one installed before they can get natural gas water heaters. Depending on where you live and the specific requirements for gas line installation in your area, you may need a licensed professional to handle the job. As such, this can add to the tankless water heater costs. 

Changes in Your Home Structure

Getting a new hot water heater may require changes to your home, adding to the unit’s cost. For example, if the location where you want to install the tankless water heater requires additional plumbing or electrical work, hiring a professional to do the job will entail further expenses. Be ready with a few more bucks for the materials needed. 

Type of Vent

You have two options regarding a tankless heater’s venting system: a direct vent and a power vent. Direct vent systems use a vent pipe that goes directly outside through a wall or roof, while power vent systems use a fan to push exhaust gasses out through a vent pipe. 

Direct venting tends to be less expensive than power vent systems since they don’t require any extra electrical components or fans. However, they need a dedicated vent pipe that goes directly outside, which can add to installation costs if you don’t already have one. 

Installation Costs of Tankless Water Heater

Tankless heaters may save you money in the long run, but the initial expense can shock you. Let’s break down the numbers and see if it’s worth the investment. 

Labor Costs

Installing a tankless water heater requires a bit more skill and expertise as it sometimes calls for a special venting system and electrical or gas hookup. That’s not something you want to DIY. 

On average, expect to pay anywhere from $500 to $1,500 in labor charges for installing a tankless system. This is just a rough estimate, and the actual price could be higher or lower, depending on your situation. 


Accessibility in this context refers to how easy it is to access the unit for maintenance, repair, and installation. If your appliance is in a hard-to-reach spot, your installer will need more time and specialized equipment to get the job done. That means you’ll likely be charged more for the installation. How much more? The amount depends on the prevailing labor rate in your area. 

Removal of the Current Heating System

Is your old heater a tank model? If that’s the case, it’s important to understand that tankless water heaters require a different setup than traditional ones. They don’t have a tank to hold the water, so the old unit needs to be removed entirely. That means disconnecting it from the plumbing and gas or electric lines, draining the tank, and hauling it away. 

All these steps take time and effort, which means they’ll drive up the overall cost of installation. Depending on the complexity of the removal, the amount could add anywhere from a couple hundred to a few thousand dollars to the final bill.  


While permits may seem like an unnecessary expense, they’re crucial for a safe and code-compliant installation of heating systems. In general, permits can cost anywhere from $50 to $500. Some areas may require multiple permits, such as plumbing and electrical permits, which can drive up the total cost.  

Power Source Conversion

The cost to convert to a different power source for your water heater depends on your home’s fuel source. For example, if your home currently runs on natural gas, converting to an electric unit will cost more than if you’re already set up for electricity.  

Even if you do opt for an electric tankless heater, you might have to upgrade your electrical service to accommodate the new system. Electrician rates are between $50 and $100 an hour. 

Pressure Regulator Replacement

Tankless water heaters rely on a specific flow rate to operate effectively. In situations where a home’s water pressure isn’t strong enough to meet the demands of a tankless system, replacing the pressure regulator can be the solution.

The task involves hiring a professional plumber who’ll also unclog pipes along with installing a new pressure regulator. The plumber’s fee typically ranges from $250 to $350.

Maintenance Costs of Tankless Water Heater

tankless hot water heater prices

If your tankless system develops some issues, servicing fees will set you back between $50 and $250, depending on the plumber rates in your area. Tankless heaters also require maintenance. Over time, mineral deposits can build up in the heat exchanger, causing the unit to run less efficiently and eventually break down. 

Descaling, which involves flushing the exchanger with a special solution to remove these deposits, is the answer. The cost of descaling can vary depending on whether you do it yourself or hire a professional. If you hire a professional, expect to pay anywhere from $100 to $300.

Overall, the maintenance cost of a tankless water heater is relatively low compared to the cost of replacing a traditional tank-style heater every 10-15 years. With proper maintenance, a tankless water heater can last up to 20 years or more. So, while there may be some upfront cost to maintain your tankless water heater, it’s definitely worth it in the long run.

Running Costs of Tankless Water Heater

Since tankless heaters only heat water on demand rather than keeping it hot and ready in a tank,they don’t consume as much energy as regular water heaters. But let’s talk specifics and look at what influences the running costs of this appliance.

  • Energy factor: This refers to the efficiency of the unit. The energy factor of tankless systems typically ranges from 0.96 to 0.99. Higher numbers mean more efficiency and more energy savings.
  • Power consumption: Combining the energy factor with how often you use your heater will give you the total power consumption of your unit. Kilowatt-hours per year is the standard measure for electric units. Meanwhile, gas models are measured in British Thermal Units (BTUs).
  • Price of energy source: Multiplying the consumption with the price of the fuel source will give you an estimate of the annual running costs of your appliance.

On average, expect to spend between $75 and $300 a year for an electric-powered tankless system. When it comes to gas models, the running cost can range from $175 to $500.


Why Should I Buy a Tankless Water Heater?

There are plenty of reasons for getting a tankless water heater. Tankless heaters are efficient, for one, because they only heat water on demand. Also, they save space because they’re compact, have a long lifespan, and let you enjoy unlimited hot water with no waiting time. 

Are Tankless Water Heaters Recommended?

Tankless water heaters have many pluses over tank models. Being more energy-efficient is one of those. Additionally, they take up less space and last longer. But whether they are the best options depends on individual circumstances, such as household size, hot water usage patterns, and budget.  

How Safe is a Tankless Water Heater?

Tankless water heaters are generally safe when installed and maintained correctly. However, like any other household appliance that uses natural gas, propane, or electricity, some risks are associated with their use. Carbon monoxide poisoning is an example of the safety hazards posed by this heater type. It could occur if a gas tankless heater is not vented correctly or if there is a gas leak. 

Which is Better Water Tank or Tankless?

Both tank and tankless heaters have pros and cons, so which of the two heater types is better depends on the situation and needs of the user. For example, a tankless water heater may be the best option for you if you have a smaller home or only a few people in your household. Meanwhile, a tank water heater may be the way to go if you have a larger home with more people and need hot water from multiple sources. 


In a nutshell, tankless water heaters may have a higher upfront cost compared to traditional tank heaters. Still, they can save you money in the long run, thanks to their energy efficiency and longer lifespan. 

But are they the best heater type for you? It’s crucial to weigh the initial investment against the potential savings over time and determine what works best for your situation. It’s also a good idea to do your research and consult with a professional before making any big purchases.  

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