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Tankless Water Heater vs. Tank: Which Is Right for Me?

Updated Jan 9, 2023

Updated Jan 9, 2023

Home > Maintenance & Renovation > Tankless Water Heater vs. Tank: Which Is Right for Me?

A water heater is a household necessity. Whether it’s to run your washing machine or take a shower, there’s no getting around the need for this modern-day appliance. If you want a new water heater, you may wonder what is best for you and your household. Our guide will walk you through the differences between tankless and tank storage water heaters and how to decide which one is right for your needs.

What Is a Tankless Water Heater?

residential condensing tankless water heater
Image Source: Canva

Tankless water heaters deliver hot water instantly, which is why they’re also known as on-demand or point-of-use water heaters. With tankless water heaters, water is heated within minutes in a heat exchanger and delivered to your faucets or shower without a need to store or heat it in a tank. Below, we’ve outlined the two main types of tankless water heaters available.


Non-condensing tankless water heaters use heat exchangers to heat water and vent the exhaust created from this process. As a more established technology with fewer working parts than a condensing water heater, they’re less expensive to buy and less likely to malfunction.


Condensing water heaters use heat exchangers to heat water and harness the exhaust as an additional heating element. Because of this, they’re extremely efficient. However, the upfront cost for a condensing tankless water heater is more.

What Is a Tank Water Heater?

tank water heater in a boiler room
Image Source: Canva

Tank water heaters are sometimes also known as storage water heaters. That’s because they store a large amount of water at any given time — anywhere between 20 and 120 gallons. Tank water heaters fill with cold water through the bottom and constantly work to heat the water that’s stored in the tank. Once heated, it exits from a pipe at the top of the tank for use. 

Though less expensive than tankless units, the large traditional tank water heaters take up a significant amount of space — often an entire closet or corner of a room. A storage tank water heater can use up valuable real estate if you have a small home. Though some tank models can be installed in a basement or an attic, it’s a moot point if you don’t have these spaces.

How Will a Water Heater Affect Energy Bills?

Regardless of the type of hot water heater you have, it’s most often powered by gas or electricity. A tankless unit is the way to go if you’re looking for the best energy savings. Electric tankless water heaters are extremely efficient. According to the Department of Energy, for homes that use a lot of hot water, electric tankless water heaters can be 8% to 14% more energy-efficient than traditional electric water heaters, with a much lower operating cost. They also avoid standby heat loss associated with traditional-style electric water heaters.

Gas-powered tankless water heaters may be less energy-conserving than gas-powered tank water heaters. The pilot light in a tankless heater can draw more energy, while the pilot light heats the water in a storage-tank water heater. However, tying into an existing gas line is required for gas water heater installation. This installation can turn into an expensive retrofit if you switch from a traditional tank style and may cancel out potential energy savings.

Tankless vs. Tank Water Heater: Pros and Cons

If you’re trying to decide between a tankless and a tank water heater, it’s important to consider the advantages and disadvantages of each option. To help you with the decision-making process, we’ve outlined the perks and downsides of each kind of water heater below.

Pros and Cons of Tankless Water Heaters


  • Energy-efficient
  • Small size uses less space
  • On-demand hot water
  • Longer lifespan


  • Electric models are less efficient
  • Expensive to purchase and install
  • Large buildings may require multiple units

Pros and Cons of Tank Water Heaters


  • Low purchase cost
  • Easy to install
  • Energy Star certified options


  • Runs constantly
  • Bulky; can only be installed in specific locations
  • Can run out of hot water

Cost Factors To Consider

There can be significant cost differences between tankless and tank-style water heaters. These cost differences are both short and long-term. Below, we’ve created a short guide of factors to consider when determining overall costs for each style of water heater.

  • Initial cost — This is what you’ll pay to walk out of the store with a water heating unit only.
  • Installation — These costs include parts, labor, and other associated installation costs.
  • Energy costs — This is what you can expect to see on your utility bill. In other words, what it costs to operate your water heater.
  • Maintenance — Does the model of the water heater you selected require maintenance? You can expect to pay maintenance costs to keep your water heater running.
  • Longevity — How long will your water heater last before it needs replacement? 

While a tank water heater is initially less expensive with a lower installation cost, it doesn’t have a long life span compared to tankless models. Tank water heaters also require semi-regular maintenance and are less energy-efficient than tankless models. Depending on your whole-house needs, tank water heaters are initially less expensive, while tankless models will save money in the long run.

What Works Best for Me?

Three major factors will help you determine what kind of water heater is best for your home. Before making a final purchase, consider the following:

  • Available space
  • Budget
  • Whole-house hot water usage

The water heater that works best for you depends on the above factors. Consider a tankless on-demand water heater if you live in a small space, have a sizable budget, and don’t want to wait for the water to warm up before you shower.

If you’re looking for an appliance that fits a smaller budget but gets the job done reliably and works well for a large household, consider getting a tank water heater. Once you consider all the factors, it should be fairly simple to decide what type of water heater you should invest in for your home.

Do Home Warranties Cover Water Heaters?

Once you’ve invested money into a new water heater, you should protect your investment with a home warranty. A home warranty is a backup insurance policy. However, it protects things that a standard home insurance policy may not — like appliances. 

With a home warranty, you can ensure that you’ll be financially protected if anything goes wrong with your water heater (or any other appliance). Home warranties help to cover the cost of repairs or replacements, making it simple to keep your household running as usual if something breaks.

Final Thoughts

It’s critical to have a water heater that functions for the specific needs of your household — that’s the most important thing to think about when deciding whether to purchase a tank-style or tankless water heater. After you determine your usage, budget, and space, your decision should be clear.

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