Experts tested tankless and storage tank water heaters to help you choose the right one based on cost, performance, and energy efficiency.
1. Key Differences
Storage Tank Water Heaters
- How They Work: Heat and store 30–60 gallons of water continuously, ensuring hot water is always available.
- Pros:
- Cheaper upfront cost.
- Simple installation.
- Reliable, steady hot water supply.
- Cons:
- Wastes energy maintaining hot water (standby energy loss).
- Bulky; may not fit small spaces.
- Higher operating costs, especially for electric models.
Tankless Water Heaters (On-Demand)
- How They Work: Heat water only when needed, using a heat exchanger.
- Pros:
- Saves space; wall-mounted design.
- Energy-efficient; eliminates standby energy loss.
- Continuous hot water supply (within capacity).
- Cons:
- Higher upfront cost.
- Complex installation; may require electrical or gas line upgrades.
- Maintenance is required, especially in areas with hard water.
2. Costs
Purchase and Installation
- Storage Tank:
- Cost: $570–$600 for a 50-gallon unit.
- Installation: $600–$800.
- Tankless:
- Cost: $525–$1,150.
- Installation: $800–$1,500 due to retrofitting needs.
Operating Costs (Annual)
- Storage Tank:
- Gas: $245.
- Electric: $580.
- Tankless:
- Gas: $195.
- Electric: $535.
3. Performance
- Storage Tank: Reliable hot water delivery.
- Tankless: Generally efficient but depends on groundwater temperature. Electric models may struggle in colder climates.
4. Payback Time
- Gas Tankless vs. Gas Storage Tank: 22–27 years.
- Electric Tankless vs. Electric Storage Tank: 12–20 years.
Tip: If retrofitting costs are eliminated (e.g., new construction), payback time is shorter.
5. Maintenance
- Storage Tank: Periodic sediment flushing.
- Tankless: Regular flushing to remove hard-water deposits and cleaning of sediment filters (cost: ~$300/year in poor-water areas).
6. Another Energy-Saving Option
Electric Heat Pump Water Heaters
- How They Work: Use a heat pump to transfer heat from surrounding air to water.
- Pros:
- Highly efficient.
- Low annual operating costs (~$240).
- Quick payback (under 1 year).
- Cons:
- Require more space and headroom (7+ feet).
- Higher upfront cost (~$1,200).
7. Choosing the Right Option
- Tankless Water Heater: Best if space-saving, energy efficiency, and continuous hot water are priorities.
- Storage Tank Water Heater: Better for lower upfront costs and simpler installations.
- Heat Pump Water Heater: Ideal for electric setups needing high efficiency and fast payback.
8. Rebates and Incentives
Bottom Line: A tankless water heater offers energy savings over time, but the higher upfront costs and long payback period make it less ideal for immediate replacements. Consider it for new builds, renovations, or space-saving needs. For existing systems, a heat pump or updated storage tank might offer better value.
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