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Tankless Water Heater Cost — Should You Invest?

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Is your water heater getting old? What is the cost of a tankless water heater to replace it?

When renovating your house or building a new one, it can be tempting to stick with a traditional tank water heater. However, if you want to save money in the long term, this might be the perfect opportunity to invest in a new tankless water heater.

Tankless water heaters have soared in popularity in recent years and can provide hot water indefinitely, whenever you need it. Your biggest challenge will be choosing a heater from the countless options that are now available.

To help you decide, this article contains everything you need to know about how much a tankless water heater will cost, the different types that are available, and extra installation prices.


Installation Costs of Water Heaters

The average cost of a tankless water heater installation is $1,500-$2,000 (1). This is much higher than a traditional tank water heater which can cost anywhere between $761-$1,426 (2).

Water Heater Type Average Cost (national average)
Traditional Tank $1,089
Tankless Water Heater – Gas $1,000-$1,500
Tankless Water Heater-Electric $800-$1,500
Solar Water Heater $1,863-$5,365
Heat Pump/Hybrid Water Heater $2,695-$2,830.50

Additional Costs

When it comes to installing your tankless water heater, there are other costs to keep in mind. These include how many units you need to supply your home, and labor costs.

  • How many units are needed: Unless your water sources are close to each other, you will need more than one tankless water heater.
  • Gas or electricity: Water heaters are a major drain on your energy bills. The type of fuel you choose will make a big difference down the line.
  • Maintenance costs: Tankless water heaters require less maintenance than traditional ones. However, maintenance is still a cost that needs to be acknowledged.
  • Reconfiguration: If your space isn’t compatible with your chosen heater, you will need to spend money on reconfiguration and additional materials.
  • System removal: Removing your old system isn’t free. Depending on where you live, the cost of this will vary. Many companies include this in the installation price.

Tankless Water Heater Types

Tankless water heaters are also referred to as on-demand or instantaneous water heaters (3). There are different types but they all do effectively the same thing. Rather than waiting for a tank to fill with hot water, these provide an almost instant supply.

Tankless water heaters can be gas or electric. Both have pros and cons and neither is decisively “better” than the other. This makes it a matter of personal preference.

It also depends on the way your house is configured and where you live. Not every situation will have both gas and electricity available. It may be worth calling a professional to figure out which choices are available to you.

Product Image of the Rinnai V75IN Tankless Hot Water Heater, 7.5 GPM, Natural Gas, Indoor Installation

Gas water heaters are powered by either natural gas or propane. Natural gas depends on you having a permanent gas supply, whereas propane needs to be bought and delivered on a regular basis. Most manufacturers that offer gas water heaters will have both options available.

With a range of models and sizes, gas water heaters can vary in output, anywhere from 140,000 BTUs to 380,000 BTUs.

Gas tankless water heaters also tend to be more expensive and harder to install, whether adding a new system or simply as a replacement cost. They typically cost at least $1,000 — sometimes even more.

Non-condensing units require a complex venting system to ensure good airflow. This needs to be a category III venting material made from stainless steel. These requirements are what make this option more expensive.

Condensing tankless systems can eliminate the need for venting altogether. They are also more efficient. Non-condensing tankless water heaters usually run in the 80% efficiency range, while condensing tankless water heaters run at over 90% efficiency.

While you may spend more money upfront, a gas option is likely to save you cash in the long run. It is important to consider where you live and which fuel is the more expensive in your area.

If gas is the cheaper of your two bills, you will want to go with a gas-powered tankless water heater. Gas can also be invaluable in the event of power outages. With an electric water heater, a power outage could leave you without hot water for a while.

Pros

  • Better for heavy usage.
  • Won’t stop working if the power goes out.
  • May help you save money in the long run.
  • Designed to last 20 years.
  • Better for colder regions.

Cons

  • Costs more than electric tankless water heaters.
  • May require reconfiguration to install.
  • Gas prices fluctuate more often than electricity prices.

Electric Tankless Water Heaters

Product Image of the Ecosmart ECO Electric Tankless Water Heater, 27 KW at 240 Volts, 112.5 Amps with Patented Self Modulating Technology, White

If you want to save money upfront, electric water heaters are a better option. These typically cost around $500 for a unit. They are also much easier to install than their gas counterparts.

Electric heaters don’t produce greenhouse gases. They are usually far smaller than their gas counterparts and don’t require ventilation. Electric units are typically small enough to fit in a closet or other out-of-the-way places.

Something important to keep in mind is that an electric tankless water heater usually needs at least 120 amps to function. The total capacity of an average household is 200 amps. You may need to invest in an upgrade to your electrical system to deal with the extra load. This could mean a further investment of around $1500.

Electric tankless water heaters are much easier to troubleshoot and repair if any issues arise. This makes it likelier that an electric water heater will reach or exceed its 20-year lifespan (4).

Pros

  • Compact design.
  • Cheaper than gas tankless water heaters.
  • Easier to install.
  • Saves money upfront.
  • Should reach a 20-year lifespan.
  • Easier to maintain.

Cons

  • You may need to buy more than one unit
  • You may need to upgrade your home’s electrical system.
  • You will have no hot water if your power shuts off.

Solar

A solar water heater is another way to save money in the long run. Having one also provides tax credits. The Residential Renewable Energy Tax Credit allows you to claim back 30% of qualified expenditures for your system if used in a residential home (5).

However, they typically cost more to install than traditional options.

With a solar-powered water heating system, you can expect your water heating bills to drop by anywhere from 50% to 80% (6). You won’t need to worry about running out of fuel because it’s powered by the sun.

While solar-powered water heaters have their own heating system, they can also be paired with a tankless water heater to heat your home (7).

There are two types of solar-powered heating systems: passive and active (8). The type you need will largely depend on the area you live in and your personal preference.

1. Passive

Passive solar heating systems are best in areas that don’t experience freezing temperatures. There are two types of passive heating systems:

  • Integral Collector Storage (ICS): With this system, cold city water flows into a water collector on your roof. These collectors hold between 30-50 gallons of water at a time. The sun and your water heating system will then work together to heat the water.
  • Thermosiphon: Thermosiphons use solar-heated water from a rooftop flat plate. The water rises through tubes and flows into the top of a storage tank. These require an 800-pound tank to be reinforced on your rooftop.

2. Active

These systems use a pump to circulate your water. Like passive systems, there are two different types of active systems:

  • Active direct/open-loop system: Direct, open-loop systems are optimal for warmer climates. The water supply is stored in an insulated storage tank and a pump pushes water through a solar collector to heat it up. Your hot water is drawn from the top of the storage tank and may pass through a booster heater as well.
  • Active indirect/closed-loop system: This system is better for cooler climates. It uses a food-safe antifreeze solution that is pumped through the collector, heat exchanger, and then back through the collector again.

Choosing the Right Tankless Water Heater

How exactly can you know which type of tankless water heater is the best for your home? Deciding on the right tankless heater type will be helpful in determining your budget.

Is it cold all year or do you experience more diverse seasons? Colder climates require water heaters to work harder, so a gas water heater might be better in these settings.

You should also ask yourself how much water you and your family use daily. For heavier usage homes, gas is typically a better option because it can keep up with your demands more easily than electric systems.

This begs the question of whether or not you need a unit to power your entire house or you want single-point systems throughout. This can usually be determined by calculating how much water you use on any given day. If you aren’t sure how much water you typically use, there are water calculators available to help you (9).

Single-Point Systems

Single-point systems are great for people who use small amounts of water every day. They can also come in handy if you’re building an extension to your home that is far away from your water heating unit.

These are also referred to as “point of use” systems. They are called this because the water is heated close to where it will be used (10).

However, these systems shouldn’t be used on their own unless you plan on buying one for each faucet and showerhead in your home. One system isn’t designed for the workload of an entire home.

Whole-Home Units

Unlike single-point systems, whole-home units have the ability to power your entire house. This means they are more expensive than a single-point system.

You will need to evaluate how much space you have and where in your house the unit can go. Obviously, you don’t want it to be exposed in your living room. Take measurements of your available space, typically in the utility closet unless it’s a new build, in which case it might be installed outside.

We have compiled a list of some of the top water heater brands and the average cost of their most popular models:

Brand Ave Cost Of Popular Models Lowest-Highest Price
A.O. Smith $600-$700 $600-$4,000
Takagi $500-$700 $500-$7,000
Rheem $200-$500 $200-$2,500
Bradford White $500-$700 $500-$2,000
EcoSmart $200-$500 $150-$600
Rinnai $800-$1,000 $500-$4,300

DIY or Hire a Professional?

Most of the time, city ordinances require you to have a permit to install a water heater yourself. You will also need to have somebody come out and inspect it to make sure everything is installed correctly.

Hiring a professional may seem like just another cost tacked onto your bill, but it’s worth it to not have to worry about permits and to know the job is done correctly.

Keep In Mind

If you choose to install yourself, it could invalidate the warranty of the unit. Make sure to check the manual for any warranty information to avoid this issue.

FAQs

What Is the Downside of a Tankless Water Heater?

Tankless water heaters have the advantage of providing hot water on demand, meaning they can do it indefinitely. This is also a possible negative, as they don’t store hot water in a tank, ready to be used. The key to a tankless water heater is its gallons per minute or GPM. With insufficient GPM, you will struggle to use multiple hot water outlets at the same time, making a tankless unit potentially unsuitable for a large family.

Why Is Tankless Water Heater Installation So Expensive?

Tankless water heaters are more expensive to install because they are not a like-for-like replacement for traditional tank heaters. Depending on the fuel source you use, you will probably need to have a new electrical line installed, or both electric and gas. If you are replacing a tankless water heater with another tankless heater, the installation will not necessarily be very expensive.

Can a Tankless Water Heater Fill a Bathtub?

A tankless water heater can provide hot water indefinitely, so you will never run out of it as long as you have fuel and water. This means a tankless water heater will be able to fill a bathtub or any other container. The issue is how quickly the heater can do so, which depends on its gallons per minute or GPM. With low GPM, you might be able to take a comfortable shower but it could take a very long time to fill a tub. Keep that in mind when choosing your heater.


Getting the Biggest Bang for Your Buck

We all want to reduce our carbon footprint and tankless water heaters are a positive step toward that. They are proven to be far more efficient than traditional water heaters and also help you save money.

However, purchasing a tankless unit can set you back anywhere from $1500 to $7000. With an additional installation cost ranging from $1,500-$2,000, it’s important to evaluate your needs before purchasing. Remember that the warranties of many units require professional installation.

Headshot of Peter Gray

About the Author

Peter Gray

Peter has been a homeowner for 35+ years and has always done his own repair and improvement tasks. As a retired plumber, Peter now spends his time teaching others how they can fix leaks, replace faucets, and make home improvements on a budget.