Tank vs. Tankless Water Heaters: Which One Saves You More Money?

When it’s time to replace your water heater, one of the most significant decisions you’ll face is choosing between a traditional tank water heater and a modern tankless system. While both options provide hot water for your home, they differ in efficiency, cost, and overall performance. Understanding the differences can help determine which system will save you the most money.

How They Work

Tank Water Heater

A tank water heater stores a set amount of hot water (typically 30-80 gallons) and keeps it heated. When hot water is used, the tank refills and reheats the new water, ensuring a continuous supply. However, this standby heating process can lead to energy waste.

Tankless Water Heater

A tankless system, also known as an on-demand water heater, heats water only when needed. When you turn on a hot water tap, cold water flows through a heating element, rapidly warming it before delivering it to your faucet. Since there’s no storage tank, energy isn’t wasted keeping water hot.

Comparing Efficiency, Cost, and Performance

1. Energy Efficiency

Tank water heaters continuously heat stored water, which can lead to energy loss, especially in households that don’t use hot water frequently.

Tankless water heaters are more energy-efficient because they only heat water as needed. According to the U.S. Department of Energy, tankless systems can be 24-34% more efficient for homes that use less than 41 gallons of hot water daily.

2. Installation & Upfront Costs

Tank water heaters have a lower initial cost, typically $800 to $1,500 for purchase and installation.

Tankless water heaters cost more upfront, and installation costs vary between $2,000 and $4,500, depending on the home’s plumbing setup.

Retrofitting an older home with a tankless system may require additional plumbing and electrical upgrades, which will increase the cost.

3. Long-Term Savings

A tank system generally lasts 10-15 years, while a tankless unit can last 20+ years, reducing replacement costs over time.

Since tankless water heaters use less energy, homeowners typically save $100 or more annually on utility bills, which can offset the higher initial cost over the unit’s lifespan.

4. Hot Water Supply & Performance

Tank heaters provide a steady flow of hot water, but once the stored supply runs out, you’ll have to wait for it to reheat.

Tankless systems provide unlimited hot water but may struggle to meet simultaneous demand in large households. Installing multiple units or a high-capacity system can resolve this issue.

Which One Should You Choose?

Choose a tank water heater if you want a lower upfront cost, a smaller installation budget, and a tolerance for occasional hot water shortages.

Choose a tankless water heater if you want long-term savings, better energy efficiency, and endless hot water without waiting for a tank to refill.

Need Help Choosing the Right Water Heater?

If you’re unsure which system is best for your home, the Elite Plumbing, Heating & Air Conditioning professionals can help. Contact us today for expert guidance, installation, and maintenance to ensure you get the best value for your investment.