Regardless of the style of home you have or the type of fuel you use with it, one thing remains the same. You need a way to heat your water for cooking, cleaning, and bathing. Water heaters come in many sizes and styles, but the two most popular methods are a standard, tank-style heater and a tankless heater, also called an on-demand heater. Both provide hot water for your needs, but they work differently. Depending on your home and needs, one may be a better fit. We outline the differences below so that you can make a more informed decision about which is right for your home.

Energy-Efficiency

Because a tank-style heater runs constantly, it continuously uses energy. If you go out of town for a day or two and use no hot water, your tank still heats the water and uses energy. Many tank-style heaters are also set to heat the water to temperatures that are in excess to what most people need, using even more energy. While they can be lowered manually, a water heater uses a constant supply of energy.

Tankless heaters only turn on when water passes through them, so they use less energy overall. They do not use a constant supply of energy, but they use more energy minute for minute when they are operating.

The tipping point for energy-efficiency comes when you use large amounts of water every day. For a household that uses 41 gallons or less of hot water daily, you will use 24% to 34% less energy with a tankless heater. This savings decreases as you increase the number of gallons used per day. If you fill a large soaking tub each night with hot water and use more water for washing machines, dishwashers, and showers throughout the day, a tank-style heater comes out ahead. But for homes that use less water, tankless styles save more energy.

Costs

Tank-style water heaters are priced mainly by their size. For a home with three or four people, you need a 50-gallon tank, which costs around $500 for a gas-fueled model. Installation costs around $45 to $65 an hour, which adds $90 to $200 to the total cost. This makes the final price between $590 and $700 for the average water heater.

Tankless heaters typically cost more to install but have similar purchase costs. A single-point unit, fueled by gas, costs around $500 and has similar costs for the plumbing installation of $90 to $200. Added to that, however, are the other installation costs, such as the new plumbing which runs between $250 and $500, the drywall ² after the wall has been opened for $200, and an access door to reach the heater for repairs for an additional $100. This makes the costs of a tankless heater between $1,140 and $1,500.

Hot Water Runout

One of the biggest problems with a standard storage-style tank is that it heats and maintains the water inside, and once you use that water, you must wait for it to refill and reheat the new water before you have more hot water available. So, if you have a 50-gallon heater and your family takes several back-to-back showers, you need to wait for it to refill and heat up before running a sink full of hot water. The only way to solve this issue is to purchase a tank that is larger than what you typically use in a day.

Tankless heaters do not run out of hot water because they heat the water as it enters the system. So, as long as you have fresh water entering the heater, then you have a constant supply of hot water as well.

Repairs

Tank-style water heaters are simple to repair and replace. They are easy-to-reach and have few parts that may need replacing. This makes repairs fairly inexpensive if something goes wrong.

Tankless heaters, however, are more complex, which makes repairs or replacement more challenging. While a maintenance opening is usually left nearby, repairs may need more access, which can mean opening walls and the required finish work later. This can make a repair more serious, time-consuming, and expensive.

Inconsistent Temperatures

One advantage of a storage tank-style heater is the fact that you get consistently hot water until the water in the tank runs out. This is usually sufficient for a shower, bath, or using the washing machine. It is also possible to use one tank to operate multiple water appliances simultaneously or on different floors or areas of the home.

Tankless heaters, however, are generally installed at a single point on the line. In most cases, that is close to the room where it will be used in. So, near a bathroom or kitchen, for example. For homes with multiple bathrooms, you may need multiple tankless heaters so that each water source has a dedicated heater.

Tankless heaters also may not turn on if the water faucet is open only slightly. So, attempting to run water through the pipes in the winter so that they will not freeze may not be an option unless you want to run the water full blast.

Finally, some models of tankless heaters may give you what is known as a “cold water sandwich.” This means that occasionally the amount of water coming through the heater is too much for it to handle, so in the middle of your hot shower, you get a blast of cold water before it reverts back to hot. Most newer models are designed to avoid this problem, but it can still occur.

Remodeling Terms Cheat Sheet

¹ Propane: A hydrocarbon gas used as a common fuel source

² Drywall: Type of plasterboard, commonly used to build walls and ceilings, composed of gypsum that is layered between sheets of heavy paper

⁴ Footprint: The entire area of ground covered by a building, including the exterior walls and porch or patio areas

⁵ Water softener: A device that reduces the amount of calcium, magnesium, and other minerals in water using ion exchange