Tankless Water Heater vs. Traditional: Which Is Best?

Tankless Water Heater vs Traditional

Whether you’re freshening up in the morning or cooking dinner at night, you rely on hot water. Every time you turn on the hot water tap, traditionally, it comes from a large tank in the basement. Nowadays, you can get hot water from a suitcase-sized device in a closet. Which one is best? In our assessment of a tankless water heater vs. traditional types, we’ll compare various aspects to help you decide.


What’s the Difference?

First, here’s a look at how each works. A tank water heater can have a 40- to 120-gallon tank depending on the system. The unit heats water, stores it in the tank, and reheats it periodically, then sends it to faucets and fixtures via your home plumbing. As of late 2021, 90% of homes in the U.S. used this type of system, according to Forbes.

A tankless or on-demand water heater doesn’t have any storage, so is therefore much smaller. It heats water that flows through tubes using burners and a heat exchanger. Powered by electricity or gas, a tankless water heater delivers heated water directly to your sinks or shower when you turn on the tap.


Comparing a Tankless Water Heater vs. Traditional Tank Units


The two types differ on many levels. Here’s a look at some of the most important ones:


Both tankless and traditional water heaters are designed to reach a set target temperature. In tests by Consumer Reports, both gas and electric traditional models performed equally well. The tankless models tested varied by type. Gas units were effective at maintaining the output temperature, but some electric models were less effective with colder incoming water temperatures. This led to speculation that electric models may work better where groundwater is warmer.


Energy Efficiency

Consumer Reports tested several models in 2019. It determined the annual energy consumption cost for a tank-based gas water heater was $245 and, for an electric model, $580. It then compared tankless water heaters of the same fuel type. For gas tankless water heaters, the annual operating cost was found to be $195 on average; for electric units, it was $535, which is not much of a difference than an electric tank model.

While electric models are more efficient, natural gas costs less, making gas water heaters less expensive to operate.



Tank water heaters are more affordable to install, while with installation and retrofitting, converting to a tankless unit is more expensive. According to HomeAdvisor, installing a tank model in 2022 can cost as little as $700 (up to $2,000), while a tankless system can cost anywhere from $1,000 to $3,000. It also takes longer to install (8-10 hours for a tankless vs. 2 to 3 hours for a tank water heater). Therefore, labor can drive the total installation cost much higher.

Also, the cost of upgrading electrical capacity is a factor, as electric tankless units can draw from 120 to 160 amps. But on the bright side, tankless models last longer—about 20 years on average. Tank water heaters only last 8 to 12 years.


Return on Investment

Payback time can be estimated using the cost of replacing a tank water heater with a tankless one, cost of operation, and how much energy you might save. Consumer Reports has estimated that converting from a gas-powered tank to gas-powered tankless water heater can yield a payback in 22½ to 27½ years. For electric models, the payback time was estimated to be around 12 to 20 years.2 The time and effort needed to remove a large tank is a factor. It’s less costly to replace an old tankless water heater with a new one when you consider labor costs.


Which Is Actually Better?


Modern tankless water heaters are by far more energy efficient. Tank-based models heat a lot of water you may not use, and must reheat it to compensate for heat loss. Converting to tankless can therefore lead to a substantial decrease in your energy bill. But that depends on the type and where you live. Tankless water heaters may be less effective in northern, colder climates.


Whether one type is better than another depends on your home and water usage needs as well. If you have an especially large household, you may need multiple tankless models to support a greater demand, for example, when multiple fixtures are used.


Schedule Water Heater Service Today

Hays Heating, Cooling and Plumbing provides high-quality water heater installation, repair, and maintenance throughout the Phoenix metro area. Whether you need a water heater calibrated or are considering a tankless water heater vs. a traditional unit, our experienced plumbers can advise you and provide the service you need. Call us at 602-497-2457 to discuss what might be the better solution for you.

About the Author

Chris Hays

Founder of Hays Cooling, Heating & Plumbing

Chris and Stacia Hays, are the founders of Hays Cooling, Heating & Plumbing; a family operated HVAC company in Phoenix founded in 2001 that services both commercial and residential customers. Chris leads a team of certified technicians who have over 45 years of combined experience and has earned and A+ rating with the BBB and a strong five star rating online. Hays Cooling, Heating & Plumbing focuses on providing support to their customers every step of the way, with exceptional service and competitive prices. If you are looking for top-notch air conditioning and heating service, contact Hays today.