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Tankless vs. Tank-Style Water Heater: A Buyers Guide

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If you're trying to decide whether to purchase a tankless water heater or a traditional tank-style heater you've come to the right place. Our buyers guide will help you make an informed decision. With multiple styles of water heaters available, we'll show you how to select the right appliance for your household.

While most people are familiar with tank-style water heaters, tankless water heaters have recently gained in popularity. But deciding if purchasing a tankless system is the right move for your household can be overwhelming and confusing. This article will cover both types to help you decide which is best for you. 

Tankless Water Heater vs. Tank-Style Water Heater

Both tankless and tank-style water heaters deliver hot water, however, they look and operate completely different. A tank-style water heater is only able to deliver the amount of hot water that's already stored within it's tank.

But without a tank to limit the amount of hot water an on-demand system can deliver, a tankless water heater is capable of heating an endless stream of hot water. 

What's the Difference Between a Tankless and Tank-Style Water Heater?

Tankless and tank-style water heaters differ in size, weight and design. In fact, about the only similarity they have is that they both deliver hot water. Let's take a closer look at some of the fundamental differences between the two:

Tankless Water Heaters

  • Tankless units have a compact design and do not require floor space.
  • A tankless water heater heats water only when there's a demand. Since they save water, energy and money, they're very eco-friendly.
  • A large up-front investment is necessary to purchase and install a tankless system.
  • Proper sizing is critical for a tankless water heater to meet the household hot water demands.
  • When properly maintained, tankless units often see service lives of 20+ years. And since they are designed to be repaired, if a part wears out, you can replace the part instead of the entire water heater!

Tank-Style Water Heaters

  • A tank-style water heater stores hot water within it's tank. Tank storage capacities range between 20 to 80+ gallons.
  • They are economical to purchase and install. But require a relatively large area, and are frequently installed on the floor.
  • The average service life of a tank-style water heater is 12 to 13 years.
  • Often the first sign that the unit needs to be replaced or repaired is when it begins to leak.

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Setting temperature on a tankless water heater

Tankless Water Heaters

Tankless systems are commonly called on-demand or instantaneous water heaters since they're designed to deliver hot water only when needed.

Because of their compact design they're able to fit into small spaces, and they don't even require floor space. Some gas models are even designed to be installed outside.

Energy efficiency is just one of the many benefits tankless water heaters have over tank-style systems. But there are drawbacks and limitations too, thus making them not the right choice for every home.

Advantages of a Tankless Water Heater

  • Endless Supply of Hot Water - When sized correctly, a tankless water heater is capable of delivering an unlimited supply of hot water.
  • Fresh Water - If a tank-style water heater isn't properly flushed, your hot water will likely be sitting in a tank with rust and mineral scale. A tankless unit will heat the incoming water on-the-spot and send it immediately to your shower!
  • Operating Costs - A tankless water heater can deliver exceptional savings on your utility bills because it only operates when hot water is needed. Standby heat loss is eliminated since water is not held within a tank.
  • Service Life - If you take care of your tankless, your tankless water heater can give you 20+ years of service! 
  • Replaceable Parts - Tankless water heaters are designed with replaceable parts. If a part wears out, a replacement part can be installed.
  • Compact Design - On-demand systems are designed to be mounted on a wall and require far less space than tank-style units. Many models are even made to work outside. 
  • Peace of Mind - When a tank-style water heater ages, the tank will rust from the inside out. Frequently, your first clue of a problem is to find a puddle of water surrounding your water heater. 

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Disadvantages of a Tankless Water Heater

  • Capacity - Proper sizing is critical with tankless water heaters. Without a tank to draw from, if your tankless can't keep up with the hot water demand, it'll be forced to deliver lukewarm water. However, there are workarounds to this problem. Some homes install 2 large units, and other times a point-of-use system can be installed to service a bathroom.
  • Initial Cost - A quality tankless unit could cost as much as 3x's more than a tank-style water heater when you add in the installation expenses.
  • Power Upgrade - Many homes aren't able to meet the electrical requirements necessary to operate an electric tankless water heater unless the power source is upgraded.
  • Output Limitations - This can't be stressed enough. A tankless water heater must be sized correctly or it won't be able to meet the household's hot water demands. The unit will only be able to deliver as much hot water as it can heat on-the-spot.
Pen and paper

Tankless Water Heater Buyers Guide

If you've decided that you want to purchase a tankless water heater you'll have a lot of things to consider. We have plenty of great resources available on our site to help you find the best system to meet your household's hot water needs.

We highly recommend reading our Gas vs. Electric Tankless Water Heater article that will compare both fuel sources head-to-head.

How to Size a Tankless Water Heater

Tank-style water heaters are sized by the capacity of their tank, but a tankless water heater doesn't have a tank. These systems are sized by their flow rate, which is simply the amount of gallons of hot water they can deliver each minute (gallons per minute or GPM).

Purchasing a model with the correct flow rate is critical to your happiness with owning a tankless water heater. There's no shortage of unhappy tankless owners who simply didn't take the time to calculate their home's hot water demands.

Sizing a Tankless Water Heater

In order to correctly size a tankless water heater, you'll need to know the following:

  • Flow Rate - The amount of water the tankless unit is capable of heating at any given time. (Measured in gallons per minute). 
  • Temperature Rise - The difference between the incoming ground water temperature and the heated output temperature.

Once you know the flow rate required to meet your household's demand, and the temperature rise for your geographic location you'll have all the information you need to find the right sized tankless for your family.


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Energy Efficiency 

Although tankless water heaters are typically more energy efficient than tank-style heaters, gas tankless systems are not as efficient as electric tankless. Let's take a closer look at each:

Gas Tankless Water Heaters

Gas fueled systems are more complex than electric fueled tankless units, and also require more maintenance. They're significantly more expensive to purchase, but they also are capable of delivering a higher flow rate. This makes them an excellent choice for larger homes that have a high demand for hot water.

There are three main types of gas tankless water heaters: Non-condensing, condensing, and outdoor.

Gas Tankless Combustion Designs

Non-Condensing Combustion - A non-condensing tankless water heater will typically be less expensive. However, the cost of installation will be higher because expensive Category III venting is required due to the corrosive condensation that develops within the vents.

Condensing Combustion - A condensing tankless water heater extracts the heat from the exhaust and does not require Category III venting. Expect to pay more for a condensing gas tankless, and less to have it installed.

Outdoor Tankless Water Heaters - Some geographic areas are an excellent choice for outdoor gas tankless water heaters. Since these units are installed outside, they do not require venting.


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Electric Tankless Water Heaters

Electric tankless water heaters are entirely different than their gas-fueled cousins. They have a simplistic design, are more energy efficient, and do not require venting.

Since they do not need to be vented and they can fit into tighter spaces, homeowners have more installation options. Electric tankless systems also require less maintenance and frequently have a longer service life. When problems do arise, diagnosing and making repairs is much easier than with a gas system.

However, many homes simply aren't equipped with the necessary power to operate an electric tankless water heater. In which case, expensive upgrades are required to the home's electrical supply.


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Tank-Style Water Heaters

Tank-style water heaters (also known as storage water heaters) are the most common type in North America. They're most commonly powered by either electricity or natural gas. However, there are other options such as a hybrid heat pump or even solar powered variations.

On average, a tank-style water heater will have a service life of about 12 to 13 years. Performing maintenance on a regular basis can help prevent sediment build-up within the tank which will help extend the service life.

Advantages of a Tank-Style Water Heater

  • Price - A tank-style water heater can cost a third of the price of a tankless water heater. Even with installation expenses.
  • Consistent Energy Consumption - Because the hot water is stored within a tank until it's ready for use, a tank-style water heater consumes its fuel source (gas or electricity) at a relatively slow consistent rate.

Disadvantages of a Tank-Style Water Heater

  • Operating Cost - Tank-style water heaters typically use more energy than tankless models. Therefore, they're more expensive to operate.
  • Standby Heat Loss - Since the hot water within the tank is waiting to be used, it'll cool over time. This is called standby heat loss, and it happens even with well-insulated tanks. The water heater will need to cycle on in order to heat the water back up to temperature, regardless if hot water has been drawn from the tank. 
  • Recovery Time - When the tank's supply of hot water is exhausted, a significant delay occurs before sufficiently heated water is available for use.
Natural gas burners with blue flames

Gas Tank-Style Water Heaters

Gas fueled water heaters are either powered by natural gas or propane (LP). They're typically more expensive to purchase, but less expensive to operate than electric units. 

The lower price of natural gas means you'll spend less money on your utility bills. But keep in mind, that just because the operating expenses are lower doesn't mean that a gas water heater is more energy efficient.

From a safety standpoint, gas fueled water heaters have a few additional concerns. There must be adequate ventilation where the unit is installed and combustible materials should never be stored near the water heater.


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How a Gas Tank-Style Water Heater Works

  • Cold water enters the tank and travels down the dip tube to the bottom of the tank.
  • As the water heats, it rises to the top through the act of convection and eventually exits the tank through the hot water outlet.
  • The water is heated with a gas fueled burner which is located at the bottom of the tank. Since combustion gases are produced from burning natural gas, the water heater must be vented.
  • Gases rise through the flue tube during ventilation and make their way outside. The flue tube is a chimney-like structure in the center of the water heater.
  • The incoming gas line connects to a gas regulator which houses the thermostat that controls the ignition of the pilot light, as well as an on/off knob to cut the gas to the water heater.

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Electric Tank-Style Water Heaters

Electric tank-style water heaters are very popular. They're inexpensive to purchase, easy to install, and have fewer safety concerns than gas water heating systems.

They are also more energy efficient. But because electricity is more expensive than natural gas, they are more expensive to operate. Although, it should be noted that electricity is considered to be a more stable energy source with fewer price fluctuations.

How a Electric Tank-Style Water Heater Works

  • An electric water heater has two heating elements inside the tank. There's one in the upper region of the tank and one in the lower. Each element has its own thermostat, and while they can be adjusted separately, they should be set to the same temperature.
  • Typically only one element operates at a time. The bottom element is the most active of the two. It heats the cold water as it enters the tank, and remains active during periods of minimal hot water use.
  • Through the process of convection, hotter water rises to the top of the tank. Since the upper heating element's thermostat isn't triggered because its surrounded by hot water, the element remains dormant.
  • Hot water exits the tank through the hot water outlet valve, which is located at the top of the tank. As the water is drawn, cold water enters the tank through the cold water inlet valve. The cold water flows to the bottom of the tank to be heated through the dip tube.
  • The upper heating element activates when large quantities of hot water is needed and the lower element isn't able to keep up with the demand. The top heating element will turn on and the bottom element will turn off.
  • With the top element activated, the water nearest the outlet will be hot and readily available when needed. But once the water at the top of the tank has reached the set temperature on the element's thermostat, the top element will shut down and the bottom element will turn back on.

Tank-Style Water Heaters: Gas vs. Electric

Gas Tank-Style Water Heaters

  • Lower Operating Expenses - Gas fueled tank-style water heaters are less expensive to operate than electric water heaters.
  • Not Impacted by Power Outages - Gas water heaters will still heat water if the electrical power is out.
  • Initial Price - Gas fueled tank-style water heaters are more expensive to purchase than electric heaters.
  • Installation - Gas heaters may be more expensive to install if venting is damaged or needs to be installed.
  • Location - Because of the need for venting, gas water heaters have fewer installation options.

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Electric Tank-Style Water Heaters

  • Less Expensive - Electric water heaters are less expensive to purchase than gas fueled water heaters.
  • No Venting Required - No ventilation is needed since combustion gases are not produced. 
  • More Energy Efficient - Electric water heaters are more energy efficient than gas water heaters.
  • Higher Operating Expenses - Electric water heaters cost more to operate than gas fueled units.
  • Will Not Operate During a Power Outage - This could be a serious inconvenience if you live in an area prone to power outages.
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Heat Pump Water Heaters

A heat pump system is a totally different type of tank-style water heater. Where an electric water heater will use heating elements to heat water, and a gas heater will use a burner, a heat pump actually extracts the heat from the air.

Although they are more expensive upfront, they're extremely energy efficient, so they cost far less to operate. A gas or electric water heater generates heat for the sole purpose to heat water, but a heat pump uses electricity to move heat from one place to another. Allowing them to be 2 to 3 times more energy efficient than an electric water heater.

Purchasing a heat pump water heater is an excellent choice, but they do have limitations. They do not operate efficiently in cold spaces, and should be installed in an area where the temperature range is between 40 to 90 degrees Fahrenheit.

How a Heat Pump Water Heater Works

A heat pump is designed to "pull" heat from the surrounding air and "drop" it into the tank to heat the water. They work on the same principle of a refrigerator, only in reverse. With a refrigerator, the heat is "pulled" from inside, and then "dropped" into the surrounding air.

When the heat pump needs assistance to heat the water, it will kick into 1 of 2 different modes:

  • Hybrid Mode - This is where the heating element will kick-in to help the unit quickly recover when a large amount of water was drawn from the tank.
  • Back-up Mode - This is when the unit uses only electricity as a fuel type and the heat pump functions as an electric water heater. This mode is used when there's limited ambient heat available.


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