Are you trying to weigh the pros and cons of buying a tankless water heater?
Tankless water heaters are incredibly energy efficient and compact but they also have a few negatives people should consider.
In this guide, we’ll go over:
- Why tankless water heaters save gas and electricity
- The high upfront cost depending on complexity
- Space saving design and easier outdoor install
- What happens if your household exceeds the max flow rate
Let’s get started with this guide!
Advantages of Tankless Water Heaters
Pro #1: Saves Gas
One of the most well-known advantages of gas tankless units is the higher efficiency.
Since the tankless water heater only heats water on an as-needed basis, the unit isn’t constantly using gas like a traditional water heater.
A conventional water heater will need to keep firing up to maintain the desired temperature of the sitting water — even if you are asleep or on a vacation.
A tankless water heater can save you around 10% to 34% on average in natural or propane gas costs. Homes with higher water usage will be on the lower end of the range. The gas savings will also depend on the efficiency and model of the tankless water heater.
The biggest savings will be seen with households that use 40-gallons or less per day.
Pro #2: Saves Electricity
The biggest gain of electric tankless water heaters is the power efficiency when compared to electric-only conventional water heaters.
Electric tankless units can save 20% to 35% in total electricity compared to traditional water heaters.
Traditional water heaters constantly need to maintain the temperature of the water tank even if you aren’t using it such as during sleep or when out of town. Electric tankless units only require electricity when you actually need hot water at the tap.
The significant savings in electricity doesn’t apply to gas tankless units since their electricity usage is minimal. Gas is the majority utility expense with gas or propane fired units.
Pro #3: Unlimited Hot Water
One of the largest advantages of going tankless is the unlimited hot water.
Since there isn’t a 50-100 gallon storage tank like with conventional units, the cold water is only heated as it passes through the heat exchanger. The cold water is then heated with the gas or propane fired burners or the electric elements.
Of course, the unlimited hot water has some restrictions associated with the BTU capacity. If there are multiple people taking showers at the same time, the tankless unit may not be able to handle it.
But if it is below capacity, you could take ‘back to back’ showers indefinitely and never run out of hot water.
Pro #4: Longer Life Expectancy
The average life expectancy of a traditional water heater is only 10-12 years while a tankless water heater’s life expectancy is 15-20 years.
The main reason for this difference is that conventional water heaters are constantly heating up water in the storage tank — increasing the thermal stress on parts.
The storage tank is also vulnerable to corrosion and sediment (mineral) buildup over time.
A tankless water heater doesn’t store water and it is only used when needed so there is less stress on the system and less corrosion. In addition, there are fewer parts with a tankless unit and if a part fails such as a heat exchanger — it can be replaced without having to change the entire tankless unit.
Tankless water heaters also tend to use higher quality materials than conventional water heaters like stainless steel or copper heat exchangers.
Pro #5: Saves Space
Tankless water heaters are significantly smaller in volume than traditional water heaters — about 2x to 5x more compact.
Tankless units typically only have a height of around 2-2.5 feet compared to a 5-6 foot height of tank units.
The thickness is also much less. Tankless water heaters are thin at just 1/2 to 1-feet in depth while conventional water heaters can take up to 24 to 30 inches when you include the catch pan.
Tankless water heaters will be mounted on the wall of your utility room or exterior wall which saves a lot of space. And with the increase of space, you can use it for more storage or other valuable uses.
Pro #6: Reduced Water Damage Risk
One of my most common recommendations during home inspections is for the new buyer to install a catch pan, drain, and water alarm underneath a traditional water heater.
This recommendation is more important if the tank water heater is installed on the main or upper level of the home — or on a finished level.
Due to corrosion, all traditional water heaters will eventually leak from the storage tank — it’s only a matter of time. But since there isn’t a storage tank with a tankless unit, there is significantly less water damage risk.
Of course, the water connections or pipes may fail and leak water, but the large risk associated with a 75-gallon water storage tank is eliminated.
Pro #7: Precise Temperature Control
Since tankless water heaters only heat the water as it passes through the heat exchanger — there is much better control over the water temperature.
With a traditional water heater, the unit has to keep reheating the tank as hot water is used up and incoming cold water mixes with the existing hot water. And even if the hot water is getting used, the storage tank will naturally drop in temperature over time which requires re-firing of the burners.
Sometimes homeowners will adjust traditional water heater thermostats to try to compensate for the temperature changes. In addition, many conventional water heaters don’t even have digital thermostats but analog.
The non-digital thermostat is typically a plastic dial on the front of the water heater with an A, B, C, or D settings which limits your control over temperature.
Most tankless water heaters will have digital temperature controls. Be sure to read my guide on how to adjust temperature on tankless water heaters (Rinnai model).
Tankless units have flow sensors that will automatically increase or decrease temperature relative to the increase or decrease of water demand to reach your desired temp.
If your household is using multiple appliances at the same time, the tankless unit will sense the increase of demand, and it will automatically increase the water temperature to compensate.
Pro #8: Federal Tax Credit
Homeowners can claim a 30% federal tax credit for the purchase and installation (total project cost) of a tankless water heater. Unfortunately, there is a maximum limit of $600 for the credit.
The federal tax credit only applies for approved energy-efficient tankless water heater that are in your own home and not for investment properties. The unit will need to have a UEF (Uniform Energy Factor) Rating of at least 0.95 to qualify.
Depending on the total cost of the tankless water heater and installation, the $600 could be a sizeable chunk in savings.
Please verify the tax credit with a qualified accountant since there are numerous conditions and the policy will likely change in the future.
Pro #9: More Safety Features
Tankless water heaters tend to have more safety features with advanced technology than tank water heaters. Some tankless units have anti-scald technology that helps prevent burns especially if you have small children.
The anti-freeze feature of tankless units will automatically turn on a heating element to prevent freezing of the internal components. There are also units with self-draining features that will instantly drain it if it detects freezing temperatures.
It is common for tankless water heaters to have over-heat protection as well. Through an internal sensor, the unit will shutoff if it detects a high internal temperature to avoid damage to the system.
Pro #10: Easier To Install Outdoors
Tankless water heaters are significantly easier to install outdoors than traditional water heaters.
A conventional water heater would need to be installed in a shed or enclosure to protect it from the elements. Exterior tankless water heaters are designed to withstand the weather and isn’t prone to corrosion like traditional water heaters.
Tankless units installed outdoors also eliminate any noise that may be annoying on the inside when the burners fire up. Don’t miss my guide on the 12-steps to reduce noise from tankless water heaters.
Since tankless units are so compact, they can be installed on the exterior wall. And when they are installed outdoors, venting isn’t required since it just exhausts to the exterior air.
Most outdoor tankless units also come with built-in freeze protection unlike indoor units.
A huge benefit of installing outdoors is you eliminate any water damage risk to the home in case of plumbing rupture associated with the tankless unit.
Disadvantages of Tankless Water Heaters
Con #1: More Upfront Cost
Tankless water heaters can be 50% to 150% more costly than comparable tank water heaters — in the $1,500 to $4,000 range.
Condensing tankless units are more expensive since there is a second heat exchanger that captures more heat from the exhaust gases.
Traditional waters heaters are in the $500 to $2,000 range depending on efficiency and tank size.
On-demand water heaters use higher quality parts than standard water heaters. For example, tankless water heater typically use stainless steel or copper heater exchangers, self-adjusting burners, and advanced electronics.
Traditional water heater have simple burners or heating elements which helps reduce the cost.
And since most tankless units are Energy Star certified, the higher design requirements increases the cost. The engineering to get that high efficiency in a compact size requires more costly research, design, and manufacturing.
In addition, the market size of tankless water heaters is just a fraction of traditional water heaters. The lower production volume increases the per unit cost since it is a more specialized product.
Con #2: Higher Installation Cost
The installation cost is frequently 2-3x more costly than traditional units — in the $1,250 to $3,500 range depending on complexity.
For example, tankless water heaters may require an upgrade to the exiting gas line, venting, and even electrical. Most gas water heaters use 1/2-inch gas lines while tankless typically requires 3/4-inch or 1-inch gas lines.
If you have a water heater that uses Type B metal venting, that’s not going to work with tankless that uses PVC.
Your home may also require an electrical panel upgrade and new electrical wiring runs to the tankless unit. Tankless water heaters use much more electricity than traditional water heaters.
The purchase and installation of a tankless water heater can be significantly more in upfront costs than people realize. Since there can be such a complexity to the installation, I recommend getting at least 3 bids from qualified plumbers who have experience with tankless water heaters.
Con #3: Flow Rate Limits Or Improper Sizing
Every tankless water heater can only handle so much demand which is limited according to it’s max flow rate measured in GPM or gallons per minute.
If your household water demand exceeds the GPM rating, then you will experience temperature fluctuations or inconsistent hot water. Explore my guide on the 3-steps to sizing a tankless water heater that goes into more detail.
Homeowners will need to determine their ‘peak demand’ of the plumbing fixtures that will be used simultaneously. It is essential to figure out the flow rate of each fixture and add them together to figure out the estimated max GPM usage of your home during peak demand.
You may even want to forecast the increase use of hot water with a growing family or if you expect seasonal house guests.
In addition, the temperature of the groundwater in cold climates may require a higher max flow rate for your tankless unit.
Gas tankless water heaters are better suited for larger households and will have flow ratings in the 6-12 gpm range while electric is typically in the 2-5 gpm range.
Con #4: Descaling Or Flushing Requirements
Tankless water heaters require annual flushing of minerals from the internal plumbing.
Even with a water softener or water filter, the water will still contain some degree of hard minerals like calcium or magnesium. These mineral deposits will build up in the tankless unit and eventually damage it.
For more information, see my guide on the 9-steps to flush your tankless water heater here.
Flushing requires a vinegar or descaling solution to dissolve the built-up mineral deposits. If you have hard water, the descaling may be required more often.
To be fair, traditional water heaters also have maintenance requirements like draining the tank of sediments and changing out the anode rod (anti-rust rod) — but most people just never do it.
It is less of an essential with traditional water heaters. Tankless units are much more vulnerable to damage if maintenance is neglected.
Con #5: Hot Water Delays And “Cold Sandwiches”
Both traditional water heaters and tankless units will have small hot water delays. However, there is usually a longer delay with tankless water heaters since it has to fire up each time hot water is needed.
Since conventional tank water heaters already have hot water stored, the only delay is getting it to the faucet.
Tankless water heaters will also have short delays of hot water every time you stop using a fixture.
The tankless unit will need to re-start each time hot water is called for at the fixture.
The “cold water sandwich” effect can be greatly helped with a hot water recirculating pump — but adds to the overall install cost. A hot water recirculating pump uses the cold water piping as a “return line” back to the tankless water heater and pumps hot water to the fixtures.
Con #6: No Hot Water During Power Outage
A downside of going tankless is that homeowners won’t have hot water during power outages.
With conventional water heaters, the hot water is in a storage tank that can maintain it’s temperature for several hours or even up to 1-2 days.
How long a traditional water heater keeps hot water during power outages depends on how much water is used (short vs. long showers), the insulation of the water heater, and the room air temperature of utility room.
If you live in an area with frequent and short power outages, this may be a sizeable factor in your decision. One solution to the power outage problem is to buy a backup generator.
Con #7: Hard Water May Require Filtration
Tankless water heaters are sensitive to water with a lot of minerals known as hard water.
Hard water can damage tankless water heaters and also may require more frequent flushing or descaling of the unit.
Most tankless water heaters will not cover damage through the warranty if it is due to mineral damage.
On average, your water shouldn’t have a total hardness of more than 7-12 gpg (grains per gallon) depending on the model.
In order to bring the water hardness down, a water filter or softening system may need to be installed which increases the installation and maintenance cost.
Con #8: Need To Drain If Below Freezing
Even though some tankless water heaters have freeze protection (small heater) if the outdoor temperature drops below freezing — it doesn’t work if power goes out.
If the power goes out, homeowners will have to drain the tankless water heater in order to prevent it from turning into a frozen brick and damaging the unit. I invite you to read my guide on the 6 steps to thaw a frozen tankless water heater.
And if there isn’t freeze protection, homeowners will still need to drain the unit if the outdoor temp drops below the manufacturer’s limit.
Of course, this disadvantage only applies if the tankless unit is installed outside (or inside if it is subject to the cold).
Con #9: Increase of Demand May Ruin Savings
If homeowners replace their gas or electric standard water heater with a comparable tankless, the increase in hot water use may negate any savings.
Since the hot water is unlimited, the home occupants may take longer or more frequent showers, or use the laundry or dishwasher more often. Also, as kids get older, they tend to use hot water more often.
This unexpected experience of homeowners will be more noticeable if you have a high utility cost in your area.
Final Thoughts
Tankless water heaters can be great investments due to their energy efficiency, longer lifespan, and space saving designs.
The unlimited hot water aspect is a big incentive for homeowners since it is on-demand heating. And if you have a high gas cost in your area, the savings can be large with some people seeing a 30-40% gas reduction.
Of course, it’s not all rainbows and roses.
Homeowners will need to weigh the increased upfront cost and any installation upgrades that may be necessary.
If you have to make significant electrical panel and wiring upgrades, or if you need to re-route gas lines and go to 1-inch diameter — the installation cost may be eye-popping.
And if you have very hard water in your area, a water filtration system is almost a certainty. Regular descaling of tankless units is also a hassle people should consider.
I hope you enjoyed our TimberSill guide! Leave a comment below on your tankless water heater experience or ask me a question.