All the Pros and Cons You Need to Know About Tankless Water Heaters

Make the switch to a tankless system to get on-demand hot water.

Updated on November 22, 2023

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When a tank-style water heater reaches the end of its life, the heating system's efficiency is often greatly diminished as the worn-out heater attempts to keep up with demand. It may be time to replace your water heater with a similar model suitable for the home's hot water demands, or possibly switch to a tankless water heater.

Tankless water heaters take up much less space than traditional tank-style heaters and are typically more efficient. These systems heat water as needed instead of continually maintaining the heat level of an entire tank of water. On-demand hot water is achieved by running a cold water line into the tankless water heater so that the water flows through the heating element. The element rapidly heats the water during the brief period when the water is inside the heater. The heated water exits the water heater and flows to the open faucet.

Due to this heating method, tankless water heaters don't need to be active constantly. Additionally, there's no limit to the amount of hot water, so users don't need to worry about running out midway through a shower. Find out more about tankless water heater pros and cons to help you decide if a tankless system is right for your home.

close up of a tankless water heater — Bill Oxford / Getty Images

Tankless Water Heater Installation

An important consideration when purchasing a tankless water heater is the installation process. It isn't recommended for a DIYer to attempt to replace a water heater due to the complexity of the project and the professional know-how necessary to ensure a water heater is working correctly.

Most plumbing companies can remove an old tank-style water heater and install a new tankless water heater, though the cost of this service varies depending on the size, type, and fuel the water heater uses. For instance, while a non-condensing tankless water heater unit is more affordable than a condensing unit, you might end up paying more for labor to have a non-condensing water heater installed because a stainless-steel exhaust system is required to function properly.

If you don't have a go-to plumbing company, take some time to research local options and compare the pricing, installation process, and warranties of each before deciding on the right company to complete the work.

Types of Tankless Water Heaters

Several tankless water heaters are available and can be differentiated based on how they heat water, the fuel used, and whether the unit is designed for whole-home or point-of-use heating.

Gas tankless water heaters burn propane or natural gas to heat the water as it flows through the system. There are non-condensing and condensing options:

Non-Condensing Tankless Water Heaters: This type of water heater burns propane or natural gas and then uses a primary heat exchanger that rapidly heats the water as it flows through the heater. This process creates hot exhaust, which must be vented through stainless-steel flue pipes. While non-condensing tankless water heaters are more affordable, the stainless-steel exhaust system can increase the overall cost of the installation.
Condensing Tankless Water Heaters: This is a more efficient type of gas water heater. It has a secondary heat exchanger that uses the heat from the exhaust to begin warming the water before it reaches the primary heat exchanger. This process increases the efficiency of the tankless water heater and cools the exhaust gas, so you don't need to pay for an expensive stainless-steel exhaust system.

Electric Tankless Water Heaters: These don't rely on a heat exchanger. Instead, the water rapidly heats when it flows directly through the electric heating element inside the tankless water heater. These systems are typically less expensive to install than a gas tankless water heater but more expensive.

Point-of-Use Tankless Water Heaters: This is a smaller alternative to whole-home tankless water heaters. As the name suggests, instead of heating the water for the entire home, point-of-use water heaters are set up near a single faucet, shower, or appliance to rapidly heat the water at the point of use.

Tankless Water Heater Benefits

A tankless water heating system is a relatively new product developed with several fundamental changes to improve how you heat water in your home.

On-Demand Heating: The user can turn on any hot water faucet and instantly get hot water. Tank-style water heaters take more time to heat the water stored in the tank.

High-Efficiency and Energy-Saving Designs: Tankless water heaters help reduce energy costs and keep more money in your pocket. A tankless water heater only activates when hot water is needed, instead of continuously using energy to heat and reheat a standing tank of water, even when hot water isn't being used.

Space-Saving Sizes: Smaller homes can get on-demand access to hot water without having to dedicate a large area to a bulky water tank.

Limitless Hot Water: Users don't need to worry about the shower suddenly getting cold, which can happen when a tank-style water heater runs out of hot water.

Long-Lasting Durability: Tankless water heaters last for up to 20 years before needing to be replaced. For comparison, tank-style water heaters have an average life of about 12 years.

Tankless Water Heater Drawbacks

While there are several key benefits of tankless water heaters, several limitations might cause you to reconsider whether a tankless water heater is the right choice for your home.

High Purchase and Installation Costs: The price of a tankless water heater can be a restrictive factor. Installing a tank-style water heater typically costs about $900, while the average cost to install a tankless water heater can exceed $3,000.

Limited Flow Rates: Reduced flow rates can lead to poor heating efficiency and low-temperature water. Before deciding on a tankless water heater, ask an experienced plumber about the appropriate flow rate for your home. Remember that, in most cases, the higher the flow rate, the more costly the water heater.

Multiple Units for Larger Properties: Generally, larger homes and families will have a higher demand for hot water. To keep up with this demand, you may need to install more than one tankless water heater or invest in a high-end tankless water heater with a very high flow rate. This ensures water is heated to an optimal temperature.

Price of Tankless Water Heaters

One of the main drawbacks preventing people from switching to a tankless water heater system is that it costs about three times as much to purchase and install as a tank-style water heater. According to HomeGuide, the average cost to install a tankless water heater ranges from about $800 to $3,500.

The price of these systems can increase or decrease depending on the size, flow rate, fuel, and type, so it's important to discuss your options with a professional plumber before deciding on the best tankless water heater for your home. For instance, an electric tankless water heater has a lower initial cost than a gas tankless water heater. Similarly, a non-condensing gas tankless water heater costs less than a condensing gas tankless water heater. However, you may pay a higher installation price to install stainless-steel flue pipes to vent the exhaust from a non-condensing system.

However, when considering the high price of a tankless water heater, it's also necessary to keep in mind that these systems are more efficient than a traditional tank-style water heater, so you will also reduce your yearly energy costs and save money in the long run.