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Upfront vs. Long-term Savings of Standard and Tankless Water Heaters


Water heaters have become an indispensable part of modern living, ensuring that every time we turn on the shower, wash our hands, or run a load of laundry, we’re met with the comfort of warm water. This domestic luxury, while often taken for granted, greatly enhances the quality of our day-to-day lives.

When it comes to choosing a water heater, homeowners are typically met with a choice between two primary designs: the traditional standard water heaters with tanks and the newer, more innovative tankless versions. Both come with their own set of advantages and disadvantages, especially in the financial realm. This blog aims to dissect the cost considerations of both, providing potential buyers with a clear picture of what to expect both upfront and in the long run.


Overview of Standard (Tank) Water Heaters

A standard water heater, as the name suggests, comes with a tank. This tank stores and heats water, ensuring a reservoir of warm water is always on standby for household use. The heating element, which is either gas or electric, maintains the temperature of this stored water.

These systems typically have a lifespan of 10-15 years, though this can vary based on the quality of the unit, water quality, and maintenance practices. When it comes to efficiency, standard water heaters tend to lose some energy through what’s known as “standby heat loss.” This happens because the system continually heats the water, even when there’s no immediate demand, leading to some energy wastage.

The upfront costs of standard water heaters are generally lower than their tankless counterparts. On average, a new tank water heater might cost anywhere from $400 to $1,200 (not including installation), though these figures can vary based on brand, size, and specific features. This initial cost advantage often makes them a popular choice among homeowners, especially those working within a tighter budget or in situations where the higher efficiency of a tankless system might not be as critical.


Overview of Tankless Water Heaters

Tankless water heaters, often referred to as “on-demand” heaters, are revolutionary in their design. Instead of storing a large volume of water and maintaining its temperature like the traditional tank systems, tankless heaters warm the water directly and instantly as it flows through the unit. This is typically achieved through a high-powered burner or electric coils that heat the water to the desired temperature as it passes through.

The average lifespan of a tankless water heater exceeds that of its tank counterpart, often lasting 20 to 25 years. This prolonged service life can be attributed to its design which experiences less wear and tear, especially since there’s no constant storage of water which can lead to sediment build-up and corrosion over time.

When it comes to efficiency, tankless systems shine brightly. Since they heat water on demand, they avoid the standby heat loss associated with tank systems. However, this efficiency does come at a cost. The initial investment for a tankless water heater is typically higher, with prices ranging from $1,000 to $3,000 or even more, depending on brand, size, and specific features.

Upfront Costs Compared

Choosing between a standard tank and a tankless water heater goes beyond just the unit’s price tag. Installation and potential home modifications play a significant role in the total upfront cost.

Purchase Prices: As previously mentioned, standard tank water heaters tend to be more budget-friendly initially, costing between $400 to $1,200 on average. Tankless heaters, on the other hand, usually start at $1,000 and can go up to $3,000 or higher.

Installation Costs: Installing a tank water heater is generally simpler and, therefore, less expensive, often ranging from $300 to $600. Tankless installations can be more labor-intensive, especially if modifications are required. Installation costs can vary widely, from $800 to $1,500 or more, based on complexity.

Additional Equipment or Modifications: Standard tank water heaters usually require minimal additional equipment unless you’re switching from electric to gas or vice versa. Tankless systems, however, might require upgrades, especially for those using gas. Gas line upgrades are sometimes necessary to supply the larger burners with enough fuel. Proper venting is crucial as well, with some models needing stainless steel tubing, adding to the cost.

In essence, while tankless water heaters can offer substantial long-term savings due to their efficiency, their upfront costs can be considerably higher. Homeowners need to weigh these initial expenses against the long-term benefits to make an informed decision.

Operational Costs Over Time

Water heaters, be it standard or tankless, contribute significantly to household energy consumption. It’s crucial to understand their monthly and yearly operational costs to make an informed purchasing decision.

Standard Water Heaters: Traditional tank water heaters store and continually heat a large volume of water, even when it’s not being used. On average, this means that a household might spend between $30 to $50 per month when using an electric model, while gas models tend to be a bit more economical, ranging from $20 to $35 per month. However, these numbers can fluctuate based on local energy prices, the unit’s efficiency, and the household’s water usage.

Tankless Water Heaters: These heaters, due to their on-demand heating nature, are generally more energy-efficient. Monthly energy costs for electric tankless models can be around $20 to $40, while gas-fired tankless units can range between $15 to $30. Again, local energy prices and usage habits will impact these numbers.

Maintenance Costs: Standard water heaters, due to sediment build-up, might require annual maintenance, which can cost around $100 to $150 each year, depending on your location and the specific service needed. Tankless systems, while having fewer issues with sediment, may need periodic descaling, especially in areas with hard water. This maintenance tends to be less frequent but can cost similar amounts, especially if professional service is sought.

Long-term Savings and ROI

When evaluating the long-term financial implications of your water heater choice, it’s essential to consider more than just monthly energy costs.

Energy Savings: Over time, the monthly savings offered by tankless heaters can add up. For instance, if a tankless heater saves a household $10 per month over a standard unit, that’s $120 per year, and potentially $2,400 over a 20-year lifespan.

Lifespan and Replacement Costs: With tankless heaters often lasting 20-25 years and tank models averaging 10-15 years, homeowners might end up purchasing one or two additional standard heaters in the lifespan of a single tankless unit.

Break-even Point: Given the higher upfront costs of tankless heaters but their monthly savings and longer lifespan, the break-even point (when the initial investment is recouped in savings) might be reached in 10 to 15 years, depending on the exact models being compared.

Factors Affecting ROI: Household water usage habits play a pivotal role. If a household uses a vast amount of hot water, the efficiency of a tankless system can lead to more significant monthly savings. Conversely, in households where hot water usage is minimal, it might take longer to recoup the initial investment.

In conclusion, while both types of heaters come with their unique set of benefits, evaluating them based on long-term savings and ROI is pivotal. Households should consider their water consumption habits, upfront budget, and long-term financial plans before making a choice.

Other Considerations in the Savings Debate

Beyond the basic costs associated with purchase, installation, and operation, there are several other pivotal considerations that homeowners should keep in mind when debating between standard and tankless water heaters:

Environmental Impact: Tankless water heaters typically have a smaller carbon footprint due to their higher efficiency. This reduction in energy consumption not only lowers bills but also contributes to a greener planet. Over the long term, adopting more energy-efficient appliances can lead to significant societal savings in terms of reduced energy production needs and environmental conservation.

Home Resale Value: Recent studies indicate that homes equipped with tankless water heaters can command a slightly higher resale value. Prospective buyers often view these systems as a sign of a modern, energy-efficient home. This can translate into a faster sale and a better price, though the exact value added can vary by region and the local real estate market.

User Satisfaction: While many users appreciate the endless supply of hot water and lower monthly bills associated with tankless systems, others might value the reliability and familiarity of a standard tank. User reviews and feedback often highlight the convenience of instantaneous hot water with tankless systems. However, some note the lag time before hot water reaches the faucet or occasional fluctuations in water temperature.


King Heating, Cooling & Plumbing’s Perspective

Having installed countless water heaters over the years, our team at King Heating, Cooling & Plumbing has observed a growing trend toward tankless systems, especially in modern homes and among environmentally-conscious homeowners.

From the feedback we’ve gathered, many of our customers appreciate the long-term savings and efficiency of tankless heaters. Yet, some remain loyal to standard tanks, valuing their straightforwardness and lower upfront costs.

For larger households with significant hot water needs or those planning to stay in their homes long-term, the investment in a tankless system often proves worthwhile. However, for smaller households, renters, or those with budget constraints, a standard tank heater may still be the most practical choice.


The debate between standard and tankless water heaters is multi-faceted. While initial costs, operational expenses, and potential long-term savings are essential components of the decision-making process, factors like environmental impact, home resale value, and personal preferences play pivotal roles too. As with any major home improvement decision, homeowners should evaluate their specific needs, budget, and long-term plans. Armed with this comprehensive overview, making an informed choice between standard and tankless water heaters becomes a more navigable endeavor.