How do tankless and tank water heaters compare?

Should you buy a tankless or traditional tank-style water heater? Consider these comparisons when you're deciding which will work in your situation.
If you are in the market for a new water heater, your choices include the traditional water heater with a tank and the increasingly popular tankless water heater systems. Which will work best in your situation?

Consider the comparisons below as you decide.

How the water heaters work

Most of us know what a tank-style water heater is because they are hard to miss. Generally located in the basement, storage closet, or garage, a large tank stores hot water until we need to take a shower, run the dishwasher, or wash our hands. To maintain the water temperature, the heater cycles on and off.

In contrast, a tankless water heater does not store any water. It heats the water when it is needed. Learn more about how tankless and traditional tank systems work.

Purchase Cost

Tankless water heaters can cost two to three times more than a traditional water heater to purchase and install. This is especially true when replacing a tank heater with a tankless system. The tankless heater often requires a new venting system and, if installing an electric tankless water heater, the electrical system may also need to be upgraded to handle the unit's electrical needs.

Although the initial purchase cost of a tankless heater will cost more than a water heater with a tank, several factors will help even out the cost:
  • Operating Costs: The savings you experience on your monthly energy bills when using a tankless system will help offset the higher initial purchase cost. Tankless water heaters are 30 to 50 percent less expensive to operate each year. The longer you plan to stay in your home the more likely you will be to recoup your original investment.

  • Installation costs for tankless systems can be offset by incentives and tax credits often offered by federal, state and local governments, and utilities.

  • Replacement Cost: Tankless water heaters have a 20+ year life span, compared to 10 -15 years for a water heater tank. While you may be paying more upfront to purchase a tankless water heater, it may last twice as long.
See "Can I save money with a tankless water heater?"


One of the main selling points for tankless water heaters is their efficiency. They often are marketed as the "green choice" and ultimately better for the environment. Because water is only heated as needed, tankless water heaters avoid the standby heat losses associated with a tank heater. Recent improvements in tank heaters have narrowed the efficiency gap between tank and tankless, but as of today, tankless still wins the efficiency battle.

Hot Water Supply

Once all of the hot water in a tank is used, it will take time for a traditional system to heat the water in the tank. If you've ever been the third or fourth person in a row to take a shower in a home with a tank water heater system you probably are aware of the repercussions of an empty tank — cold showers. Conversely, a tankless water heater can supply unlimited amounts of hot water as long as the tankless unit is sized correctly.

See "What should I consider when choosing a tankless water heater?"


A tank heater system can take up to 16 square feet of floor space, which is why they usually are located in a storage closet, basement, or garage. A tankless water heater is about the size of a carry-on suitcase and takes up no floor space. These wall-mounted units are installed either inside or on the exterior of your home. A trained dealer or contractor can help with determining that.

The Winner is ...

Well ... you'll need to make that decision based on your needs and situation. Need more help? Find a recommended plumber who can offer advice and install the system you choose.

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