Tank vs. Tankless Water Heater: Costs, Pros and Cons

Water heating is one of the biggest energy costs in most homes, and the typical tank lasts only about 8 to 12 years. If yours is approaching that age, it pays to decide in advance between a new tank and a tankless model, before a leak forces a rushed choice.

How they differ

A tank water heater keeps 40 to 80 gallons of water hot around the clock. A tankless (on-demand) heater heats water only as it flows through the unit. That means no standby heat loss and an endless supply of hot water, as long as you don't exceed the unit's flow rate.

Cost comparison

Converting from a tank to a gas tankless often requires a larger gas line and new venting, which is why the installed price varies so much.

Sizing a tankless unit

Tankless heaters are sized by gallons per minute (GPM) at a given temperature rise. Add up what might run at once: a shower uses about 2 GPM, a dishwasher about 1.5 and a kitchen faucet about 1.5. In colder regions, incoming water may be 40°F, so the unit has to raise it about 80°F to reach 120°F, which cuts its effective flow rate. Undersizing is the most common tankless complaint.

Which should you choose?

• Choose a tank if your budget is tight, you plan to move within a few years, or your home lacks the gas line and venting a tankless unit needs.
• Choose tankless if you plan to stay long-term, want endless hot water, or are short on space.
• Consider a heat pump water heater if you have an electric tank today: it can use far less electricity than a standard electric tank, though it needs space and works best in a garage or basement.

Maintenance that adds years

Drain and flush a tank once a year to remove sediment, and check the anode rod every few years. Tankless units need descaling, typically annually in hard-water areas. A small yearly effort can add years to either type. If you're budgeting for several home systems at once, our home warranty guide explains what is and isn't covered.

Prices are typical U.S. ranges and vary by region, home and contractor. Always get several local quotes and follow local building codes; hire a licensed professional for electrical, gas and structural work.