Woman washing her hands with water running from a faucet

Whether it is winter or summer, a hot water supply is necessary all year round. While some people stick to conventional hot water tanks, many have started switching to tankless water heaters as a better alternative.  

If you are looking for an uninterrupted water supply without spending all your money on utilities, it may be time to switch to a tankless water heater. A tankless heater provides a modern-world, energy-efficient solution for those annoying water heating problems. 

Now you may wonder, “What are tankless water heaters, and how do they differ from traditional water heaters?”.

Well, keep reading to find out.

What Are Tankless Water Heaters?

Tankless water heaters have an automated water heating process, meaning water is only heated when you need to use it. Tankless heaters only heat water when the water is flowing or actually needed. Thus, they are more energy-efficient than conventional water tank heaters.

Using high-powered gas burners or electric coils, they only heat water when needed rather than reheating the water at all times. Although these tankless water heaters require more power, they are still more energy-efficient.

Despite being high-powered, tankless water heaters still expend less overall energy than conventional heaters.

According to Consumer Reports, these tankless heaters help reduce energy costs by 22% compared to standard water tank heaters. 

That seems almost too good to be true. However, tankless heaters indeed have some drawbacks.

So, if you are wondering whether a tankless water heater is a suitable option for you or not, keep reading.

We will discuss in detail the pros and cons of tankless water heaters.

The Working of Tankless Water Heaters

So, how do tankless water heaters work that makes them unique from tank water heaters?

The first thing you need to know is that tankless water heaters heat water instantaneously without using a storage tank. They rely on electricity, propane, gas, or oil for power.

That said, here is how a tankless water heater works:

  1. Initiation: The process starts when you turn on the hot water tap.
  2. Detection: A tankless water heater has a flow sensor that detects the flow of water into the heater. The sensor then signals the control panel to start generating heat for hot water.
  3. For gas-fired: For gas tankless water heaters, the control panel turns on the fan, which allows outside air to enter, igniting the burner.
  4. Heat transfer: Gas-fired tankless water heaters have a heat exchanger that captures heat from the burner and transfers it to the moving water.
  5. Tempering: The super-heated water leaving the exchanger is tempered by the mixing valve.
  6. Temperature regulation: The temperature sensor determines and regulates the water temperature based on the desired threshold. It achieves the regulation by adjusting the gas valve, flow rate, and mixing valve.
A tankless water heater's control mechanism mounted on a blue bathroom wall
Are tankless water heaters more expensive than regular ones?

How Much Does a Tankless Water Heater Cost?

While it has been established that the cost of tankless water heaters is higher than that of traditional tank-based water heaters, the cost varies depending on several factors.

On average, the total cost of purchasing and installing a tankless water heater is between $1,000 and $4,800.

The cost of the unit itself has the most significant impact on how much you’ll pay. In most cases, the cheapest electric tankless water heater will cost you a minimum of $200.

The purchase price goes all the way to $2,500 for the most expensive models.

Factors That Affect the Cost of a Tankless Water Heater

It’s not practical to give the exact cost of a tankless water heater in the U.S. because it’s affected by certain factors. Knowing these factors will help you find ways to save money on your tankless water installations.

Let’s look at the main factors that affect the cost of tankless water heaters.

The Type of Tankless Water Heater

There are two basic types of tankless water heaters:

  • Single-point: Single-point tankless water heaters, also known as point-of-service tankless water heaters, are the cheapest options. They cost between $145 and $775. These are ideal for homes where the plumbing system covers an extensive area.
  • Whole house: Whole house tankless water heaters have their costs ranging between $300 and $2,500. 


Besides buying the tankless water heater unit, installation is another factor that determines the overall cost.  

Installation costs for tankless water heaters depend on the type you go for—whole house or single point.

Single-point tankless water heaters are slightly cheaper than their whole-house counterparts. The former doesn’t involve installation over a wide area, making the process less costly.

In most cases, installing whole-house tankless water heaters will cost you between $1,000 and $3,500.

Power Source

The source of power for your tankless water heater also affects how much it will cost. As mentioned, tankless water heaters are either electric, propane, oil, or gas-powered.

An electric tankless water heater is the cheapest of the four.

  • Electric tankless water heaters: Their prices vary between $170 and $800. The best part is that some models can use solar energy.
  • Gas-powered tankless water heaters: Their prices range between $230 and $2,500.
  • Propane-powered tankless water heater: They cost between $195 and $2,200. Remember, you’ll also have to incur the cost of a propane tank.
  • Oil-based tankless water heaters: They’re the most expensive options and will cost you between $1,000 and $3,000. 

Condensing Vs. Non-Condensing

Unlike their non-condensing counterparts, condensing tankless water heaters have an additional heat exchanger that transfers more heat to the water.

While the condensing units have high efficiency and flow rate, they come at an additional cost. The second heat exchanger adds to the cost, making condensing tankless water heaters more expensive than their non-condensing counterparts. 

10 Benefits of a Tankless Water Heater

Tankless water heaters are not just energy-efficient; they offer numerous other benefits, including:

The valve of a tankless water heater is adjusted
You don’t have to wait a few minutes for your water to run hot. With these water heaters, you can just jump right in the shower!

Instantaneous Hot Water Supply

Tankless water heaters are known for providing an on-demand hot water supply. 

As soon as the cold water in the pipes is released from the tap, hot water starts flowing through them immediately.

The water remains hot for however long you keep the hot water faucet open. 

With a delay of ten seconds or less, these tankless heaters stand by their promise of providing instant hot water supply to you.

Longer-lasting Than Conventional Water Heaters

A standard heating unit has a life expectancy of about ten years, while tankless water heaters can last up to 20 years. 

When you install a tankless water heater in your home, you can save your money in the long run. You do not have to spend extra dollars repairing or replacing the heating unit every year.

Reduces Average Monthly Expenses

Despite having a higher initial cost, according to Consumer Reports, tankless water heaters can be 22% more energy-efficient than conventional water heaters.

Therefore, you can save big money every month with less energy consumption.

Easy to Install and Can Fit Into Small Spaces

Tankless water heaters are much smaller than traditional heating units, making them easier to install and attach to your bathroom walls.

You can even install one in your kitchen without compromising on the interior décor, as it does not look bulky or out of place. 

The small size also makes tankless heaters an excellent choice for smaller homes or those who prefer a minimalist interior.

A tankless water heater installed on a wall
Aside from saving on energy costs, there are also other tax incentives to those who will install tankless water heaters.

Special Tax Break Offers

It has been established that tankless water heaters are relatively more energy-efficient than traditional heaters. Hence, their usage is being encouraged globally so that every country can help reduce their overall energy expenditure.

As of 2016, the US federal government offers a 10% tax credit on the overall price of installing a tankless water heater. 

This credit can be subtracted from the overall high cost of a tankless water heater, helping you save costs in the long run.

Helps Overcome Standby Loss

The main difference between tankless and traditional water heaters is that the latter heats the water even when not in use.

As a result, standard water heater users consume more energy and bear higher energy costs.

On the other hand, tankless water heaters provide instant hot water and help overcome this ‘standby loss.’

They Provide Uninterrupted Hot Water Supply

Traditional water heaters offer a limited capacity for hot water storage. Therefore, in homes with standard heaters where family members take showers one by one consecutively, the hot water supply is bound to run out.

Additionally, it takes time to heat up after the hot water supply is exhausted. Tankless heaters do not work on a water-storage system. 

Water is heated instantly, making it convenient for two or more people to shower simultaneously.

Even if consecutive showers are taken, the water keeps heating, providing an uninterrupted supply of hot water throughout the day.

a showerhead superimposed against a tankless water heater
You can take those hour-long showers without running out of precious hot water!

Can Function Using Multiple Energy Sources 

As the technology of tankless heaters is still new, it makes sense that consumers are offered multiple energy source options for different models. 

Tankless heaters can be powered by both electricity and natural gas. While both types have pros and cons, an electric heater may prevent expensive service fees or issues due to shotty gas lines. 

More Extended Warranty Than Traditional Water Heaters

The average lifespan of a tankless water heater is up to two decades, making it much more long-lasting and durable than traditional heaters. 

If anything goes wrong with your heater, you can usually write to the company, and they will have it repaired or replaced at no cost.

Ideal for Households With Fewer Family Members

If you have a small home with a few family members, chances are your hot water consumption is also considerably less. 

In such cases, a tankless water heater is an excellent choice as it makes up for the standby loss.

Tankless heaters further solve the problem of inconsistent hot water supply since fewer people equate to less simultaneous hot water usage.

Drawbacks of Tankless Water Heaters

While there are several benefits to installing a tankless water heater in your home, on the one hand, there are various drawbacks, too.

Tankless water heaters may not be the right fit for your home for several of the following reasons.

Temperature Does Not Stay Consistent Throughout

The survey conducted by Consumer Reports suggested fluctuating water temperature as the most common problem faced by tankless water heater consumers. 

Tankless water heaters cannot sense if the tap is half-open.

Moreover, the heating unit can also not send hot water to multiple taps at a time, so you may notice fluctuating water temperature.

More Expensive Than Conventional Water Heaters

Although they may offer more durability and a longer lifespan than traditional water heaters, this comes at a price. 

Tankless water heaters have a hefty installation cost. A standard heating unit starts at $500-$600, while even the lowest-quality tankless heaters start at $1000, which goes up from there. 

Additionally, the more expensive tankless water heaters are relatively more complex than traditional water heaters. Therefore, their installation process requires the expertise of a service professional. 

Along with the price, installation charges are something you must consider if you decide to invest in a tankless heater.

A water softener is filled with salt.
It’s a new technology and may need more moving parts for it to function.

Requires Extra Equipment

A tankless water heater requires a water softener to ensure that it can run smoothly without any hiccups. 

A water softener is a bulky piece of equipment mounted alongside the water heater, creating more required storage space than a traditional heating unit. 

The cost of a water softener also increases the already high price of a tankless water heater, which contradicts the space and money-saving aspects of a tankless heater.

Some Models Provide A Fixed Amount of Hot Water Supply

Standard models of tankless water heaters have a limited water storage capacity, which rarely exceeds several gallons. 

These units are also unable to send out hot water through multiple outlets simultaneously, making these units better equipped to be used by one person.

On the other hand, a standard heating unit can easily store up to 80 gallons at one time. As a result, they can easily keep up with multiple people using hot water through different outlets at a time. 

If you are using a traditional water heater, you do not have to worry about your water running out while you shower and do your laundry together.

Changing Gas Lines May be Required

A tankless water heater is a recently introduced technology, and most homes are not equipped with its installation requirements. 

To install a tankless water heater, you may have to ask your contractor to reroute gas lines or add extra vents to accommodate it, unlike traditional water heaters. 

Closeup of repairs being made to a tankless water heater
If you haven’t rerouted your gas lines yet, you may need to cough up additional cash and time before you can use your new tankless water heater.

It Could Take Several Years to Recoup the Initial Purchase Cost

As tankless water heaters are more energy-efficient, they can help save costs on utility bills. 

However, the initial cost of installing a tankless water heater is comparatively much higher than a traditional heater. This means it may take up to several years for a homeowner to cover the compensation cost of installing the tankless heater.

According to the Consumer Reports survey, a tankless heater will only save you up to $75 annually. 

If we estimate the initial cost to be a minimum of $1000, it is understandable that it would take more than 12 years before the savings make up for the installation cost.

Traditional Water Heaters Can Still Work With a Few Lifestyles Changes

You could save the same or more energy as a tankless water heater just by making a few lifestyle changes regarding water consumption and energy conservation.

The few changes you can make in your home and lifestyle include:

  • Reducing water wastage
  • Installing pipes that give low-pressure running water
  • Installing an advanced version of a dishwasher
  • Installing water-saving faucets and showerheads
  • Reusing and recycling water as much as possible

If you make the following lifestyle changes, the amount of money saved could be more significant than installing a tankless water heater plus its monthly heating cost. 

Alternatively, you can invest in heat pumps instead of buying a tankless water heater, which offers unique tax credit advantages

If you wish to find out more about heat pumps, check out this detailed guide showcasing a head-to-head comparison between tankless heaters and heat pumps. 

Invest in Solar Heaters Instead of a Tankless Heater

Solar heaters are another great alternative to traditional and modern water heating solutions.

If you decide to invest in solar heaters instead of a tankless water heater, there are various benefits, including not having to reroute gas lines or suffer high electricity bills. 

These heaters work using solar light, a renewable form of energy. Solar power means enjoying a consistent, uninterrupted, readily available energy source. 

All in all, solar heaters can quickly compensate for their higher initial cost.

Invest in Energy-Saving Heaters Instead

Like solar heaters, various other energy-saving heaters are available in the market.

These energy-efficient heaters are just as efficient as tankless water heaters. Additionally, they have a much lower cost. You can quickly install these energy-efficient water heaters at your home by choosing a trustworthy and reliable company. 

Another great feature is they are equipped with traditional gas lines, and you can enjoy a 10% federal tax credit on them.

Final Consideration – Are Tankless Water Heaters Worth It?

Water heaters are an essential component of your home, and it is impossible to survive without one.

When it comes to making more sustainable living choices, investing in tankless water heaters may turn out to be a worthy investment. 

Consider tankless water heaters as a long-term investment for energy efficiency and the high resale value of your property. 

In addition, a tankless water heater can change how you consume water and encourage you to use it more responsibly. 

Moreover, smart technology devices have started increasing in popularity with time. Therefore, to keep up with the pace of the current world, it would be best to invest in a tankless water heater instead of a conventional water heater tank.

In the end, the decision is yours. Evaluate your needs based on what is most vital for you and your family.

For a comparison between the different types of water heaters, you may check out Who Can Last Longest and Efficiency Compared.

One Comment

  1. It’s wonderful that this article points out that using a tankless water heater can help lower your home’s energy bills. My wife and I have been searching for ways to reduce our utility bills this summer, so we’re considering hiring a plumber to install a tankless water heater in our house this Friday. I’m going to look for a good plumber that offers tankless water heater installation services in the area that we can employ.

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