Tankless vs. Tank Water Heaters

Choosing the right water heater is a common headache for many households. Tankless water heaters are known for their efficiency, using energy only when you need hot water. This blog will guide you through the differences between tankless and water heaters, helping you make an informed decision.

Let’s explore together!

Understanding Storage Tank Water Heaters

Storage tank water heaters keep hot water reservoirs ready for use, making them convenient for immediate needs. They operate by heating water continuously, which means they expend energy to maintain the temperature of the stored water.

This method leads to what is known as standby heat losses, where energy is wasted even when no one is using hot water. Equipped with insulation to reduce these losses, they come in various capacities, typically up to 50 gallons for household use.

Models run on different energy sources like natural gas or electricity, with natural gas units slightly cheaper than their electric counterparts. For instance, a 50-gallon Rheem gas storage tank heater costs about $600, while an electric model might cost $570.

Despite their lower initial cost compared to tankless heaters, the operating costs over time can add up due to the constant energy consumption needed to keep the water heated. These systems include features such as a pilot light and heating elements that work together to ensure there’s always hot water available on demand.

Understanding Tankless Water Heaters

Tankless water heaters, often called on-demand or instantaneous, heat water only when needed. This means they don’t suffer from standby heat loss, which plagues traditional storage tank models.

As you turn on a tap or start an appliance like a washing machine or dishwasher requiring hot water, the tankless unit quickly heats the water through an efficient heat exchanger. This process ensures that energy isn’t wasted heating and reheating water that sits unused in a tank.

Consequently, homeowners enjoy lower utility bills due to this innovative energy-saving technology.

Moreover, studies reveal that tankless options are 22 per cent more energy efficient on average than their storage counterparts. They boast a longer lifespan because of reduced corrosion and wear since they operate only when hot water is demanded.

Despite their higher initial installation cost than conventional hot water heaters, these devices offer substantial long-term savings and energy sustainability benefits. Tankless models run more efficiently using gas or electricity as fuel sources, providing households with instant access to warm showers and peace of mind, knowing they’re contributing less to environmental harm and enjoying better value for money over time.

Comparing Tank vs. Tankless Water Heaters

When comparing tank vs tankless water heaters, we delve into how each impacts your bills and comfort at home, guiding you towards making an informed choice.

Initial cost

Tankless water heaters typically set you back between $1,000 to $3,000 at the outset. This higher initial cost reflects the advanced technology that saves energy by heating water on demand.

In contrast, storage tank water heaters initially have a lower price tag. These systems rely on keeping a water tank heated and ready for use.

Opting for a full-size tankless heater involves upfront costs similar to high-end storage heaters. Buyers must weigh these costs against potential energy efficiency and life expectancy benefits.

Investing in your home’s heating and cooling system could lead to significant savings over time.

Operating cost

Operating costs for water heaters significantly impact household budgets over time. Storage tank water heaters, while cheaper initially, often incur higher operating expenses due to standby energy losses.

These occur when heat is lost from the stored water to the surrounding environment, necessitating more energy to maintain the set temperature. Opting for an insulated storage tank can mitigate some of these losses.

In contrast, tankless or on-demand water heaters boast greater energy efficiency, translating into lower ongoing costs. The EPA highlights that a demand water heater requires 34% less energy than its storage tank counterparts.

This difference arises because they only heat water when needed rather than maintaining a constant supply at a preset temperature. As such, households find significant savings in energy bills over time with a tankless system despite the higher purchase price.

Lifespan of the unit

Tankless water heaters stand out for their longevity, typically serving your hot water needs for about 20 years or more. Regular maintenance boosts their lifespan significantly, allowing some models to operate efficiently for up to 30 years.

This durability surpasses traditional tank water heaters, which usually last between 10 and 15 years. The Department of Energy highlights this advantage of tankless systems over their storage tank counterparts.

Choosing a tankless water heater could mean less frequent replacements and potentially lower long-term costs despite the higher initial purchase price. With options available in gas and electric models, these units provide a dependable source of hot water while occupying less space in your home.

Their extended service life makes them an appealing choice for those looking to invest in sustainable home improvements.

Energy efficiency

One of the standout benefits of tankless water heaters is their superior energy efficiency compared to traditional storage tank models. They achieve 24%–34% more energy efficiency by only heating water on demand, which eliminates standby heat loss completely.

This means no energy is wasted in keeping a tank full of hot water heated when it’s not being used.

Homeowners find that switching to a tankless system can lead to significant savings on their energy bills. Reports highlight that these units are, on average, 22% more efficient than their storage counterparts.

The direct heating method of tankless heaters ensures hot water is available without storing and continuously reheating gallons of water, making them an eco-friendly choice for those looking to reduce their carbon footprint and save on utility costs concurrently.


Tankless water heaters shine in performance, especially for homes with lower hot water demands. They provide a continuous hot water flow, ensuring you never run out mid-shower or while running the dishwasher.

With their ability to be 24%-34% more energy efficient for homes using up to 41 gallons of hot water daily, these units ensure you enjoy both convenience and savings.

Transitioning to a tankless system proves advantageous for those prioritising energy efficiency and a constant hot water supply. These systems boast about 22% better energy efficiency than traditional storage tank models.

This results in less energy consumption and significant reductions in monthly utility bills, aligning perfectly with modern eco-friendly living standards.

Pros and Cons of Tankless Water Heaters

Choosing a tankless water heater can seem smart for many homeowners. These units offer benefits and drawbacks that one should carefully consider.

  1. Energy Efficiency: Tankless models are 24% to 34% more energy efficient for homes that use 41 gallons or less of hot water daily. They heat water only when it’s needed, saving on energy costs.
  2. Longer Lifespan: Generally, these heaters outlast their storage tank counterparts, offering years of reliable hot water with proper maintenance.
  3. Saves Space: Without needing a large tank, they require less room and can be installed in smaller spaces such as closets or under sinks.
  4. Endless Hot Water Supply: They deliver a continuous hot water flow rate, making long showers or filling up hot tubs hassle-free without running out of hot water.
  5. Lower Operational Costs Over Time: Despite higher upfront costs, they tend to have lower operating expenses due to their high energy efficiency.
  1. Higher Initial Investment: The initial cost of purchasing and installing a tankless system is usually higher than that of traditional storage water heaters.
  2. Retrofitting Challenges: Homes not originally equipped for tankless systems might need significant and costly modifications to accommodate them.
  3. Limited Output for Simultaneous Use: In households with high demand for hot water from multiple sources simultaneously, some models may struggle to keep up.
  4. Electric Models May Increase Electric Bills: While electric models are highly efficient, their use can lead to higher electricity bills if the household consumes a lot of hot water.
  5. Hard Water Can Cause Problems: In areas with hard water, the buildup can reduce efficiency and lifespan if not adequately managed with regular maintenance.

Pros and Cons of Tank Water Heaters

Tank water heaters come with their own set of benefits and drawbacks. They are generally more affordable upfront than their tankless counterparts.

  • Lower initial cost: Storage tank water heaters are less expensive to buy and install, appealing to those on a tight budget.
  • Simplicity in placement: These units can be easier to position in your home due to their common design and installation requirements.
  • Immediate supply: They instantly provide a large volume of hot water, suitable for simultaneous demands such as showers and dishwashers.
  • Wide availability: Easily found in many stores, storage tank water heaters make replacements quick and straightforward.
  • Higher operating costs: Over time, they can be more expensive due to energy inefficiency, especially if not used wisely.
  • Takes up more space: The bulky size requires much room, often in the basement or utility cupboard.
  • Limited hot water supply: Once the tank’s reserve is depleted, it takes time to heat up a new batch of water.
  • Shorter lifespan: Generally, they last between 10 to 15 years, shorter than tankless models. This necessitates more frequent replacements.
  • Risk of corrosion and leaks: Over years of use, the inside of the tank can corrode or leak, potentially causing damage to your property.

Comprehensive Guide on Water Heater Sizing

Choosing the right size for your water heater is crucial to ensure it meets your household demands efficiently. For tankless models, sizes vary significantly, ranging from compact 20-gallon units ideal for smaller homes or flats to larger systems boasting capacities of 80 gallons or more, suited for spacious homes with higher water usage.

Such variations highlight the importance of understanding your home’s daily hot water needs before selecting. Whether you opt for a gas furnace-powered system or an electric water heater, ensuring the capacity aligns with your consumption can improve energy efficiency and performance.

To start sizing, consider the number of bathrooms in your house, how many people live there, and typical high-demand appliances such as clothes washers and dishwashers that require hot water.

A.O. Smith and other consumer reports suggest that calculating gallons per minute (GPM) needed during peak usage times can guide you towards choosing a model that won’t leave you cold during back-to-back showers or when running multiple appliances simultaneously.

Additionally, if you’re leaning towards green technology like solar water heating systems or heat pumps, assess their capacity by the gallon and their energy factor (EF) ratings to ensure optimal energy-efficiency levels.

Frequently Asked Questions (FAQs)



Deciding between tankless and water heaters hinges on your household’s hot water needs, space considerations, and budget. While the initial outlay for a tankless model may be higher, its long-lasting nature and efficiency can lead to cost savings over time.

On the other hand, traditional storage tanks offer immediate access to hot water and cost less upfront. Carefully weigh these factors against your family’s lifestyle to make an informed choice that suits you best.

For more information on selecting the appropriate size for your water heater, please visit our comprehensive guide on water heater sizing.


1. What’s the difference between tankless and tank water heaters?

Tankless water heaters provide hot water on demand without storing it, using either gas furnaces or electric coils, saving space and energy. Tank water heaters store gallons of hot water in a tank, ready for use, but may require more energy to maintain the temperature.

2. How do I know if a tankless water heater is better for my home?

Consider opting for a tankless water heater if you have limited space and access to a natural gas line or don’t mind using electricity. They’re ideal if your household uses less than 41 gallons per minute of hot water daily.

3. Can switching to a tankless water heater save me money?

Yes, although the initial cost is higher, you can reach a break-even point due to lower operating costs from using fewer kWh than traditional tanks. Savings also come from not having to heat stored water constantly.

4. Are there any incentives for installing an eco-friendly heating system like this?

Some regions offer incentives such as rebates or tax credits when you opt-in for energy-efficient systems like tankless heaters through affiliate links or government programs to reduce overall energy consumption.

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