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Water Heater Cost of Ownership vs Cost of Installation: Making The Right Choice

A guide to help you choose a water heater that fits your financial needs – now and for the long haul.

So you need to buy a new hot water heater — but what kind? How much should you spend? Should you focus on the water heater installation cost, or weigh the energy efficiency over the lifespan of the water heater as more important? Is a tankless unit really worth it? 

There’s a lot of cost factors to consider when researching water heater replacement: the cost of the water heater itself, the labor costs for installation, the cost of fuel over time, and even the additional costs of having a plumber or electrician run new gas lines or electrical wiring. 

In addition, there’s the lifespan of the unit. If you purchase a heater destined to last 10 years there is the same replacement cost that will occur in another decade. However, if you purchase a tankless it can last 30 years if maintained properly… this is a major math factor for those planning to drive down their roots.

We’ll break it down for you here so you can walk through your decision with confidence, knowing that you are making the right choice for your home. 

Will you stay or will you go? 

Homeowners need to consider more than just the price tag on the new water heater itself. If you are confident that you will be living in your home for 10+ years, make sure to buy a water heater that has a lower cost of ownership in the long run, even if the upfront cost of installation feels a little steep in the beginning. This will save you money overtime because you will use less fuel over time — and that’s a cost that’s almost certain to go up as your water heater ages. 

If you plan to move on from your current home soon, it might be more beneficial to your bottom line if you choose a lower-cost home improvement option in the form of a more conventional water heater. 

How much water will you need?

Think about the number of people in your home, too. If it’s just you and you don’t use a lot of hot water overall, a smaller tank size and more affordable unit that is less energy efficient might suit you just fine. If you have a larger family, you’re bound to use more hot water in cooking, dishwashing, and bathing and should consider a more powerful and energy efficient water heater that will stand up to heavy use over time, hopefully leading to less water heater repair costs. has a helpful calculator to figure out what size water heater your needs require, helping you to choose the right size for your new unit. 

Another consideration is whether or not you will go with a professional-grade water heater or an inferior heater purchased at a big box store. This will affect the cost of installation, energy use, overall performance, and the type and length of a warranty on your water heater. Water Heaters Now only installs professional-grade water heaters which are a class above the economy grade ones you can get at a big box store. 

Also, consider whether or not you’ll need to hook up your new water heater to natural gas or propane, and research the average cost in your area. In some instances, opting for one type of fuel over another could be more cost effective. 

The Three Major Types of Water Heaters

There are three basic types of water heaters to choose from: tankless water heaters, hybrid (or heat pump) water heaters, and conventional tank water heaters. 

Each of three types heat water in slightly different ways and have their own pros and cons. The most basic difference is that tankless water heaters heat water on-demand, while tank water heaters heat water and keep it warm until you need it, expending more energy over the long haul. Here’s how the three breakdown in relation to one another in terms of installation cost and operating costs. 

Tankless Water Heaters

Tankless water heaters cost the most to install. They really are an investment in your home and in saving on energy costs in the future, but can be more than worth it if you plan on staying in your home long-term and/or plan on using a lot of hot water on a regular basis. They also, on average, last wo to three times as long as tank water heaters, means with the ever rising cost of natural gas and LP you’ll be winning financially at the same time you would be replacing the tank again. From there your tankless will be paying you annually 300-500 annually. 

These are really efficient machines, with all sorts of technology built in. The new Rinnai tankless water heater even learns your water usage patterns over time and adjusts its heating schedule accordingly, saving you even more energy and money year after year. 

Hybrid or Heat Pump Water Heaters

Hybrid water heaters are the most efficient water heater on the market, but do have the second-highest installation cost behind tankless water heaters. These are also known as heat pump water heaters, and you can read all about them here. The fantastic thing about heat pump water heaters is that they absorb existing heat from the surrounding air and concentrate it to heat your water, making this a high-efficiency water heater. Rather than creating heat from nothing, they are re-using heat — which makes them wonderfully energy efficient. 

There are also some current tax savings available on heat pump water heaters, which is worth exploring for any homeowner looking to swap out their old water heater in 2023 and beyond. 

If you currently have an electric water heater, a heat pump style replacement would save thousands on your electric bill in the span of a single tank’s life cycle.

Conventional Tank Water Heaters: Gas or Electric

You likely already have a conventional tank water in your basement or utility closet. They’re the most commonly installed water heater on the market thanks to their low cost to purchase and install. The two big downsides are is that they cost the most to operate and they have a shorter lifespan. Regardless of their fuel source, conventional tank-style heaters will cost more in monthly utility bills than either tankless or hybrid water heaters. 

In a tank vs. tankless heater comparison, these storage tank water heaters are almost always cheaper upfront, but have a higher cost to operate over the years, using more water and fuel to deliver hot water when you want it and where you want it. 

A few last things. 

As you shop for a replacement water heater, recognize that installation costs will vary based on the specific model, the first-hour power rating, and the tank size that you will need, regardless of which type of unit you choose. 

If you decide to switch from a gas water heater to an electric water heater — or vice versa — there may be some additional installation costs to switch out the fuel type in your home. If you are moving the location of your water heater — even just slightly, you may also have to run some new water lines. Keep in mind that the venting may need to change also depending on fuel type and location, so make sure to factor HVAC changes into your total cost of installation. 

One bonus to having Water Heaters Now install your new water heater is that we can take care of it all, all at once. We’ll even dispose of your old water heater for you! 

Still unsure which type of hot water heater is right for you? We can help you take a look at the water heater replacement cost you are facing and let you know what your best options are.

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