Tankless Water Heater Buying Guide

Are you in the market for a tankless water heater? Not sure what you need? Bewildered by the different options? Our buyer’s guide will tell you everything you need to know before you buy a tankless water heater, from costs to how they work, and both pros and cons.

What is a Tankless Water Heater?

So...what do we mean when we say "tankless water heater"?

A tankless water heater is a device that heats water as it flows. It eliminates the need - as the name suggests - for a conventional tank water heater. A high powered tankless water heater can produce hot water in 10 to 15 seconds, heating as the water flows through a heat exchanger. Typically, they have copper heat exchangers because of their high thermal conductivity and ease of fabrication. And because a tankless water heater is smaller, they can be installed virtually anywhere in the home.

How Does a Tankless Water Heater Work?

A tankless water heater only fires into life when you turn on the hot water tap. As the water flows, a sensor detects the water entering the system and alerts the control panel to work its magic and produce hot water.

The control panel switches on a fan to draw in outside air, as the gas valves open and the burner ignites. All of this happens in a split-second.

The heat exchanger traps the warmth generated from the flames and transfers it to the water in the copper pipes. Mixing valves regulate the flow and heat, while temperature sensors monitor the water to ensure that it is the correct temperature. If any adjustments are needed, the control panel moderates the gas valves and water valves to increase or decrease the flow of water and heat.

Tankless water heater units can be situated anywhere in the home, but you will need an outside wall or roof to fit the vents that carry away the exhaust gasses.

How Much Does A Tankless Water Heater Cost?

Prices vary for a gas-fired tankless water heater from around $200 to $4,500 for a central tankless water heater that provides hot water to your entire home. For electric tankless water heaters, the costs are a lot lower, with prices ranging from $100 to $1,000.

Rebates are Available

One of the best ways of bridging the cost gap between tankless water heater units and tank-type models is to search for utility rebates. Tankless water heater units are so efficient that they qualify for the federal Energy Star program, making them eligible for refunds. In some cases, the price gap could be eliminated, meaning that you get an upgrade at no extra cost, as well as 20 years of hassle-free hot water supply.

Do Tankless Water Heaters Need Much Maintenance?

When you have your tankless water heater installed, speak to the contractor about signing up for an annual service plan. It keeps your heater operational for years to come. If you live in a hard water area, it might be an idea to flush a water and vinegar solution through the system to remove any chalking or limescale from the heat exchanger. It only takes half an hour and keeps your water flow at a healthy level.

Think of your heat exchanger tubes like arteries; when they get blocked, the system fails.

The Advantages of a Tankless Water Heater

As with all forms of heating, there are pros and cons to each system, and a tankless water heater is no exception.

Continuous Flow of Hot Water

The main advantage is never running out of hot water. Powerful elements heat the water as it flows, giving you a never-ending supply. Unlike a tank-type water heater, where you have to wait for the entire 50-gallon tank to fill and heat, with a tankless, you only have to wait seconds for your hot water.


Newer condensing tankless water heater units have a second heat exchanger which collects the exhaust heat destined to get extracted out of the vents. This increases the efficiency of the heater by almost 17% when compared to first-generation tankless water heater technology. It all adds up to a 95% conversion of fuel to heat. Now that’s efficient.

That said, even the first-generation heaters are up to 22% more efficient compared to a tank-type heater. The Department of Energy (DOE) estimates that gas-fired tankless heaters save on average $108 per year when compared to a tank-type system. The tankless electric variety saves, on average, $44 per year.

Smaller in Size

Tanked water heaters are growing in size, thanks to federal rules that require increased insulation to reduce heat loss. Compare that to the average suitcase-size tankless model, and there is a world of difference. It means installing a tankless water heater requires minimal space, and they can be located anywhere there is a means of ventilation to the outdoors.

Increased Safety

First, there is no water tank to worry about. Second, harmful bacteria like Legionella has no place to hide, unlike a water tank. Third, carbon monoxide can’t leak into the house because the vents and air supply are sealed, sending the exhaust fumes outdoors.

Easy to Use

Because tankless water heaters are advanced, they are also easy to use. Sensors and smart technology control everything, so there is very little interaction required from you.

Simple to Winterize

If you have to shut up the house in the winter, with a tanked system, you have to perform a drain down to avoid leaks and burst pipes as the temperature plummets. There are no such worries with a tankless water heater because there is no water tank. Just turn it off.

Longer Lifespan

Tankless water heater units have a working lifespan of 20 years. To get the best out of your heater, you should have it professionally serviced once a year, and this ensures that the water heater will last as long as possible.

The Disadvantages of a Tankless Water Heater

More Expensive

Compared to tanked water heaters, tankless varieties are expensive. They can be as much as two or three times the price of a traditional tanked heater. The costs will fall as popularity grows, but the best way to look at the added expense is to balance it against the higher efficiency of the tankless water heater on a day-to-day basis.

Also, tankless water heaters last up to twice as long as tank-type water heaters, so it can be a false economy opting for the cheaper system. Properly maintained, a typical tankless water heater can last as long as two basic tank water heaters.

Costly Installation

We recommend you trust a professional to install a tankless water heater. Also, if you are retrofitting a tankless water heater in place of a tanked system, the costs will increase because the heating contractor will have to install some new pipework. Overall though, the costs here largely depend on your particular home requirements.

Sensitive to Water Flow Rate

A tankless water heater relies on a good flow of water, so if your faucet or shower head becomes clogged with chalk and limescale, it could reduce the efficiency of your water heater. And if the flow gets too low, the system may shut down completely.

Plus, if more than one person is using a faucet or shower, it can affect the flow of the water, and sometimes the temperature too. It means someone is likely to experience a cold shower. However, this is a worse issue for tank water heaters.

Return on Investment is Slow

There is no hiding from the fact that recouping your initial purchase costs through energy efficiency savings, can take time. Saving $108 per year sounds great, but when you consider the initial purchase price of the tankless water heater, it can be many years before you reach any kind of “efficiency profit.”

Types of Tankless Water Heaters

Gas Tankless

This is the most common type of tankless water heater. They are efficient, with many newer models converting 95% of the energy used into heat. They can be natural gas or fed by a propane tank, depending on your location. According to the US Census Bureau, the number of homes supplied with natural gas totals about 48%, so that leaves a large chunk of homes that don’t have access to natural gas. The only other option, if you want a gas-fired tankless water heater, is to use a propane tank.

Electric Tankless

Electric tankless water heaters are less common than gas varieties, and on the whole, are less efficient. A gas tankless water heater, especially the condensing models, is about 95% efficient. Electric tankless water heaters are smaller and cheaper to buy, typically costing between $100 and $1,000.

Electric tankless water heaters have a shorter lifespan when compared to the gas varieties. They typically last for ten years. Again, if you look at the cost comparisons between gas and electric, initially, it is cheaper to buy an electric tankless water heater. Still, when it comes to efficiency and longevity, the gas ones come out on top.

Final Thoughts

If you care about stemming the rising costs of the energy you use and want the best return on your investment, then a tankless water heater could be the answer. Not only are these units efficient and compact, but they also last for 20 years. That’s double the lifespan of a regular tank heater!

We get that not everyone can justify the initial price of buying and installing a tankless water heater. And if this is you, a tank variety might be the best option in the short term. But think about the daily running costs, especially as a gas-fired tankless water heater could save you money every year.

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