Tankless Water Heater Cost — Should You Invest?

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

Are you renovating or building a house? Or, has your water heater just bitten the dust and you need to look for a new one? If you want to save money in the long run, it may be wise to invest in a tankless water heater.

Traditional tank storage water heaters need a regular energy supply to retain the temperature of the water. In comparison, tankless water heaters only heat the water when needed. This makes the tankless water heater much more cost-efficient.

Installation Costs of Water Heaters

The average cost of tankless water heater installation is $1,500-$2,000 (1). This is much higher when compared to a traditional tank water heater which can be installed for 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

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

  • How many units needed: Unless your water sources are close to each other, you’ll need more than one tankless water heater.
  • Gas or electricity: Water heaters are a big drain on your energy bills. So, the type of fuel you choose can make a big difference down the line.
  • Maintenance costs: Tankless water heaters will require less maintenance than traditional ones. However, that’s still a cost that needs to be acknowledged.
  • Reconfiguration: If your space isn’t compatible with your chosen heater, you’ll need to spend money on reconfiguration and additional materials.
  • System removal: Taking out 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 may also be referred to as demand-type or instantaneous water heaters (3). There are different types but they all do the same thing. Rather than waiting for a tank to fill with hot water, these give you an instant supply.

Tankless water heaters can be gas or electric. Both have pros and cons and neither is ultimately “better” than the other. So, it’s really all about your personal preference.

It will also depend on the way your house is set up and where you live. Not every situation will have both options available. It may be worth calling a professional to figure out what 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 relies 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 variety of models and sizes. Gas water heaters can range 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. They typically run to at least $1,000 — sometimes even more.

Non-condensing units require a complex venting system to give good air flow. This needs to be category III venting material made from stainless steel. These requisites are what makes this option more expensive.

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

While you may be spending more money up front, a gas option is likely to save you cash in the long run. It’s important to keep in mind where you live and which fuel is the most expensive in your area.

Obviously, if gas is the lower of your two bills, you’ll want to go with a gas-powered tankless water heater. Gas can also be a godsend in the event of power outages. With an electric water heater, a power outage could mean you’re without hot water for a while.


  • Better for heavier 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.


  • Costs more than electric tankless water heaters.
  • May require reconfiguration to install.
  • Gas prices fluctuate more often than electric.
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’re into saving money up front, electric water heaters are a better option. These will typically run around $500 for a unit. They’re also much easier to install than their gas counterpart.

Additionally, they don’t produce greenhouse gases. Electric units are much smaller than their gas counterparts and don’t require ventilation. They’re typically small enough to fit in a closet or other out-of-the-way spaces.

One word of warning, though. An electric tankless water heater usually needs at least 120 amps to function. The total capacity for an average household’ is 200 amps. You may, therefore, 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 much more likely that an electric water heater will last or exceed its 20-year lifespan (4).


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


  • You may need to buy more than one unit
  • You may need to upgrade the house’s electrical system.
  • You’re out of hot water if your power shuts off.


Investing in a solar water heater is another way to save money in the long run. Not to mention that having one also comes with tax credits. The Residential Renewable Energy Tax Credit allows you to claim 30 percent of qualified expenditures for your system if used in a residential home (5).

They do, however, typically cost more to install than other traditional options.

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

Keep in mind that while solar-powered water heaters have their own heating system. Still, they can 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, of course, personal preference.

1. Passive

Passive solar heating systems are best for 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. Just like passive systems, there are also two different types of active systems:

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

Choosing the Right Tankless Water Heater

But how exactly can you know which type of tankless water heater is the best for your home? Determining the right tankless heater will certainly be helpful in deciding on your preferred budget.

Is it cold year round or do you experience regular seasons? Colder climates require water heaters to work harder, so a gas water heater may work better in this case.

You also need to 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 needs easier than electric.

This begs the question on whether or not you need a unit to power your entire house or if you want single point systems throughout. Usually, this can be resolved simply by calculating how much water you use on any given day. If you aren’t sure of 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 addition onto your home that is away from your water heating unit.

These are also referred to as “point of use” systems. They’re 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 built for the workload of an entire home.

Whole Home Units

Unlike single-point systems, whole home units have the ability to power your entire home. These will, of course, be 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 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 may be installed outside.

We’ve compiled a list of some of the top water heater brands, and the average cost of their popular models, for you right here:

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’ll 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 know you don’t have to worry about pulling permits and the job is getting 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.

Getting the Biggest Bang for Your Buck

We all want to do our part in reducing our carbon footprint on the planet and tankless water heaters are a good step towards that. They’re proven to be much more efficient than traditional water heaters and help you save money too.

However, purchasing tankless units can set you back anywhere from $150 to $7000. With added installation costs ranging from $1,500-$2,000, it’s wise to evaluate your needs before purchasing. Remember also that most units require professional installation.

Are you ready to switch over to tankless? What type of water heater do you currently have in your home? Is there a certain brand you prefer over another? We want to hear from you in the comments.

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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.