Tankless Water Heater vs Tank Water Heater, Gas & Electric Tanks & Costs Compared

Tankless water heater vs tank debate is one which comes up often and is a key factor in choosing a tankless water heater, both of these types have pros and cons. We’ll explore them below along with cost and options for each. The goal is to help you decide which type is right for your purposes.

Tankless Hot Water Heater vs Tank Operation

Hot Water Now: Tankless water heaters are also called on-demand water heaters because the heat water only when it is called for at a faucet, shower or appliance.

Gas Options: Both types are available in gas and electric models. Gas water heaters are available in natural gas (NG) or propane (LP) versions – or can be converted from NG to LP with a conversion kit.

Electric Options: Both whole house and point of use tankless electric water heaters are available.

Cost? Whole house electric tankless water heaters and storage tank models cost less upfront, but they have higher operating costs in most areas of the country where natural gas and/or propane are readily available. Tankless water heater cost vs tank water heater cost is discussed below.

There are two other types of tank water heaters that are outside the scope of this storage tank vs tankless water heater comparison. Solar water heaters use the power of the sun to heat water. Heat pump water heaters use heat pump technology to pull heat out of the surrounding air to heat water.

Tankless Water Heater vs Tank Water Heater: How Much Water?

Tank Size: Storage tank water heaters range in size from about 30 to 80 gallons, though 40 and 50 gallon water heaters are most common. When the tank is fully heated, that’s how much hot water is available. However, as the water is being used, the tank must start heating again. Gas storage tank water heaters heat more quickly than electric, so you won’t run out of hot water as readily.

What is Tankless GPM? Tankless models are rated by how many gallons per minute, or GPM, of hot water they produce.

Whole house vs Point of Use: Whole-house gas models range from about 5 to 12 GPM, though most homeowners opt for a unit from 6-10 GPM.

Point of use electric tankless water heaters start at about 0.6 GPM and range to about 2.5. Whole house electric models are available in 3.0 to 6.0 GPM.

Tankless Water Heater vs Tank – Pros and Cons

Each has its benefits and disadvantages.

Tankless Water Heater Pros

  • On demand hot water: Water is heated only when it is wanted. This prevents standby heat loss, meaning water that is heated in a tank and begins to cool off – lose its heat if not used. The only water cooling off is in the hot water pipes.
  • Lower operating costs: No standby heat loss means less energy is used.
  • Longevity: Tankless gas water heaters have a life expectancy of 15-20 years vs 8-15 for storage tank models. Gas units last longer than electric in both types.
  • Compact design: They take up less room and can be hung on a wall.
  • Inside and outside models: To save on the cost of venting the unit, some gas tankless models are designed for installation outdoors.
  • Lower installation cost for outdoor models: No vent must be run, reducing cost for materials and labor.
  • Instant hot water: If you have an electric point of us (POU) water heater beneath a countertop that feeds one faucet, you can have hot water within a second or two. Instant hot water is available from a whole-house gas water heater with a recirculation pump and line to a most-used point. Ask your water heater retailer or installer about recirculating hot water to keep it hot “at the tap.”

Tankless Water Heater Cons

  • Upfront cost: The units cost more when comparing tankless water heater cost vs tank styles.
  • Cold climate capacity: When incoming water is below 60 degrees Fahrenheit, the GPMs will drop below the rated capacity, sometimes significantly. When shopping for a tankless water heater, find out how many gallons per minute it can be expected to produce where you live. In Minnesota, for example, with incoming ground water of about 37F, a tankless water heater rated for up to 10 GPM can be expected to deliver 4-6 GPMs.


Tank Water Heater Pros

  • Cost less: Price is 30% to 60% the cost of a tankless unit when comparing a whole house tankless water heater vs tank models.
  • Installation might be easier/less costly.

Tank Water Heater Cons

  • Standby heat loss/higher energy cost: They have higher operating costs because water is often heated, only to cool down before being used. Then it must be heated again.
  • Running out of hot water: If there is high demand, someone might get caught in a cold shower.
  • Shorter Lifespan: They just don’t last as long as tankless counterparts.

Tankless Water Heater vs Tank Cost

This chart sums up tankless water heater cost vs tank plus other key factors to consider when comparing storage tank and tankless models.

Tank water heaters are mostly whole-house models. In the chart, Tankless Electric and Tankless Gas listings are whole house heaters. Tankless POU are electric.

Tankless Water Heater vs Tank Cost Compared
Type Average Cost Installation Capacity Savings
Tank Electric $400 – $600 $250 – $500 30 – 60 Gallons N/A
Tank Gas $600 – $850 $600 – $1,200 30 – 100 Gallons N/A
Tankless POU $150 – $500 $150 – $400 0.6 – 2.5 GPM 35%-40%
Tankless Electric $550 – $800 $350 – $700 3.0 to 6.0 GPM 45%-50%
Tankless Gas $1,200 – $2,100 $600 – $2,000 5.0 to 12.0 GPM 50%-60%

Tank water heater cost: Electric water heaters start as low as $300, but most cost $400 to $600 or a little higher. Tank style gas water heaters range from about $400 to $1,300, though an average cost is about $700. While not discussed in detail here, electric heat pump water heaters cost $1,400 to $2,500.

Tankless water heater cost: Electric point of use units with 1.0 to 4.0 GPM capacity cost $200 to $500. Whole house electric models range from about $400 to $1,000. Gas tankless units range from $900 to $2,100. For all types, cost is dependent on capacity and features.

Installation Cost: Tank vs Tankless Water Heaters

Installation costs are pretty similar.

The cost to install a tankless water heater vs tank units depends on several factors.

Replacement costs less than initial installation: A new installation requires running a gas line and/or an electric line to the unit. A gas water heater must be vented if installed indoors.

110 vs 220 Volts: Most 110V point of use electric water heaters have a standard plug. If an outlet is in place, it costs little to mount the unit and run the water line into and out of it. When a 220 circuit, line and outlet must be run, cost will triple at least.

Indoor vs outdoor: As noted, cost to install a gas tankless water heater outdoors is about half for new installations since no vent is required.

One vs many: There is an important difference to consider when comparing electric tankless water heater vs tank models. Your equipment cost might be lower with a single electric whole house water heater than with multiple POU electric units. The chart shows average cost of a whole house electric water heater installed to be around $1,200.

The average cost for each POU electric water heater installed is about $600. Install two, and you are at the average cost for one whole house model. Three POU units installed is $1,800 and four is $2,400.

Operating Cost

There are two principles at work: Gas is more efficient than electricity. And tankless are more efficient than tank water heaters.

Gas water heaters are whole house models.

From most efficient to least efficient:

  1. Tankless gas water heater
  2. Tank gas water heater
  3. Whole house tankless electric water heater
  4. Point of use electric water heater
  5. Whole house tank electric water heater

The chart column Savings shows average energy saved when using a tankless vs tank water heater of the same fuel type. The data is from the Energy Star program.

Choosing a Tankless vs Tank Water Heater

Here are a few buying tips to consider.

Buy a Tank Water Heater If:

  • Lowest upfront cost is your top priority
  • You plan to move in the next five years – probably too soon to recoup the higher upfront cost of a tankless water heater
  • You would have to install a new, costly vent in order to switch to a tankless gas water heater

Buy a Tankless Water Heater If:

  • Lower operating costs are your goal
  • You’ll stay in your home long enough to realize the long-term energy cost savings tankless gives you
  • You already have venting in place – or your climate allows for outdoor installation of a tankless water heater
  • You have metered water, and you’re tired of watching your money go down the drain waiting for hot water to get to the faucet
  • You want the luxury of instant hot water

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