Nowadays everyone is installing tankless water heater. That’s because they are absolutely worth it and they save you money. Correct? To find out if a tankless water heater is worth it, we did some calculations to see how much money a tankless water heater saves.
According to Statista’s 2016 and 2017 StudiesTankless water heater sales increased by 14% in 1 year alone (2016 vs 2017). In 2017, $451 million worth of these energy-efficient heaters were sold in 2017. That’s a huge number and sales have been increasing even more in recent years.
To adequately determine whether tankless water heaters are really worth it, we need to look at 3 key aspects:
- fixed price A tankless water heater (compared to standard water heater cost).
- operating cost A tankless water heater (compared to the cost of running a standard water heater).
- Life span Tankless vs On Tank Water Heater.
Here’s a quick summary:
Of course, tankless hot water heaters are worth it. They have a higher upfront cost but a lower running cost and last twice as long as traditional tank water heaters. You’ll find a full summary (we’ll calculate them using best rule-of-thumb estimates) along with calculated savings costs at the end of the article.
You can determine the financial viability of choosing a tankless water heater by:
upfront cost + operating cost + 20 years lifespan
We used all 3 of these factors to estimate whether you save money by installing a gas or electric tankless water heater. More importantly, we estimate how much money you save on hot water bills over a 20-year lifetime.
We’ll do this in a structured way by looking at the costs of both gas and electric tankless water heaters versus gas and electric tank water heaters. Let’s start by looking at the most downside of tankless water heaters:
How much does a tankless water heater cost? (upfront cost)
The biggest disadvantage of tankless water heaters is the initial cost. As we’ll see later, tankless water heaters reduce your water heating bill. However, whether it is worth replacing a tank water heater with a tankless water heater depends on the immediate cost of the new tankless heater.
To determine the cost of a new tankless water heater, we need to sum these 2 upfront costs:
Tankless Heater Unit Cost + Installation Cost
The price of the unit depends on how large a tankless heater you need and if you choose a gas or electric unit. pay attention: Tankless gas heaters are more expensive than electric units but have a lower running cost because electricity is more expensive per BTU than gas.
Gas Tankless Heater Cost + Installation (about $3,000 vs. $2,400)
Gas tankless water heaters cost anywhere between $700 and $2,500. Of course, the smaller 7 GPM units will cost less than the largest 11 GPM units. Here’s a neat graph of Rinai’s 2021 gas tankless water heater prices:
The cost of installing a gas unit ranges anywhere from $1,000 to $4,000. You can get an in-depth study of how much tankless water heater installation costs here. You should also check what size tankless water heater you need here. This will give you a more accurate estimate of upfront costs.
Overall, you are looking at an upfront cost range of $1,700 to $6,500 to purchase and install a gas tankless water heater. Average family approx. with ‘get away’ $3,000 full upfront cost.
To determine whether gas tankless water heaters are worth it, we need to look at standard gas water heater prices and installation costs.
According to forbes advisor, the average price of a tank water heater + installation and labor cost (installers work from $50/h to $150/h) is $1,200. At the lower end, the full price could drop below $1,000, and it could reach several $1,000 at the higher end.
As we see, the upfront cost of tankless gas water heater vs tank water heater is estimated at:
$3,000 (without gas tank) – $1,200 (gas tank) = $1,800
We also need to keep in mind that gas water heaters last 20 years. This means that, over a 20-year lifetime, you will have to pay once for a gas tankless water heater and twice for a gas tank water heater.
Even if you need to replace a gas water heater twice, the average estimate for a 2x heater + 2x installation is $2,400; Still under $3,000 for a gas tankless water heater. However, even considering the upfront costs (and $600. 20 years cost difference of side of gas tank heater), we can see that gas tankless water heaters will be worth it.
If gas tankless water heaters save you money (and how much) it will be clear when we add running costs.
However, before doing that, let’s take a similar estimate for the upfront costs of electric tankless water heaters to see if they’re worth the money:
Electric Tankless Heater Cost + Installation
Are Electric Tankless Water Heaters Worth It? Let’s first tally up upfront costs the same way we did for the gas unit.
Electric tankless heaters can cost anywhere between $300 and $1,700 with installation.
According to the Forbes article we referenced in a previous chapter, an electric tank water heater costs (with installation) about $100 to $200 less than a gas unit. This means that, on average, we can estimate that an electric tank heater costs about $1,000 with the installation.
For reference, here are the cost of the best electric tankless heaters by kW capacity by Stiebel Eltron:
Here’s the surprising part for many homeowners interested in the financial viability of an electric heater: The upfront cost of both electric tankless and electric tank water heaters is around $1,000.
You also need to keep in mind that tankless heaters last for 20 years while tank heaters only last 10 years.
Over a 20-year lifespan, you’ll need to pay about $1,000 for an electric on-demand water heater. Here’s the interesting part: You’ll have to pay about $2,000 for a traditional tank water heater because you’ll need to replace the first unit after 10 years and pay $1,000 again.
The Outtake: Even when comparing upfront costs, you save $1,000 over a 20-year period by choosing a tankless electric water heater.
Now, let’s look at the most important part:
Running Cost of Tankless Vs Tank Hot Water Heater
Cost + installation of hot water heaters runs in terms of $1,000. Running costs over a 20-year period, for comparison, run in terms of $10,000.
Between the two, the running cost is the most important part in figuring out whether tankless water heaters are worth it.
According to the US Department of Energy,Water heating is about 18% of your home’s energy use.’ According to the DOE, an average household pays $400 to $600 for hot water each year.
If we take the average $500/year, we can calculate that an average household will pay $10,000 to heat water with a conventional tank water heater over the next 20 years.
Now, the main question is as follows:
How much can we reduce the water heater bill if we install a tankless water heater?
Here we can also look to the DOE for guidance. This is what they found when comparing the energy efficiency of tankless water heaters versus tankless water heaters:
for homes that use 41 gallons or less Daily hot water, on-demand water heaters can be 24%-34% More energy efficient than traditional storage tank water heaters. they can be 8%-14% More energy efficient for homes that use more hot water — around 86 gallons per day. (DOE on tankless water heater savings)
An average household will use less than 41 gallons of hot water per day. As we have estimated, it will cost $10,000 over the next 20 years. If we reduce that number by installing a tankless water heater and using an average 29% lower running cost estimate, we can see that a $10,000 hot water bill becomes a $7,100 hot water bill.
Here is the clearance: On average, an average family will Save an estimated $2,900 on hot water costs over the next 20 years As a result of installing a tankless water heater.
Let’s take a look at a larger than average home as well. If we take into account that we have a house 2x or 3x bigger (and hot water needs) than the average home, and we save an average of 11% on hot water costs, we can calculate these numbers Can get at:
- 2x the average hot water requirement. Tank water heater hot water bills over 20 years: $20,000. Tankless hot water bill in 20 years: $17,800. 20 years of ongoing cost savings: $2,200.
- 3x the average hot water requirement. Tank water heater hot water bills over 20 years: $30,000. Tankless hot water bill in 20 years: $26,700. 20 years of ongoing cost savings: $3,300.
As we’ve seen, in all cases, we save $1,000 over a 20-year period on hot water costs because of the significantly higher energy efficiency of a tankless water heater than a standard tank water heater.
With all these data, we can determine if it is worth getting a tankless water heater. We will do this separately for gas and electric units:
Result: Are gas tankless water heaters worth it? (Estimated savings: $2,300)
Let’s look at 20-year average estimates to see if it’s worth getting a gas tankless water heater.
- Gas tankless unit cost + installation versus gas tank unit cost + installation = $600 in favor of the gas tank unit.
- Cost of running a gas tankless unit versus cost of running a gas tank unit = $2,900 in favor of a tankless gas water heater.
If we subtract the $600 additional upfront cost from the $2,900 hot water heating savings, we get this great result:
Yes, tankless gas water heaters are worth it. On average, you can expect to save about $2,300 over 20 years by choosing a gas tankless water heater over gas tank water here.
Result: Are Electric Tankless Water Heaters Worth It? (Estimated savings: $3,900)
Let’s do the same calculation to see if electric tankless water heaters are worth it (time span: 20 years):
- Electric tankless unit cost + installation vs. electric tank unit cost + installation = $1,000 in favor of an electric tankless unit.
- Cost of running an electric tankless unit versus cost of running an electric tank unit = $2,900 in favor of a tankless electric water heater.
The 20 years of upfront and running costs both favor electric tankless water heaters. A standard household is expected to save an average of $3,900 by choosing an electric tankless water heater compared to a traditional electric tank heater.
Yes, tankless hot water heaters actually save money, and quite a bit.
We used the best 20-year rule-of-thumb estimates and averages to determine how much you can save by installing a tankless water heater. All numbers for all homes, big or small, gas or electric units, and so on, show the same thing:
Installing a tankless water heater will save you $1,000 over the next 20 years. Because of the high energy efficiency, tankless water heaters only make financial sense, and you can even get rebates and tax credits on top of the hot water savings.