Our water heater buyers guide will help you make an informed decision when it's time to choose a water heater. There are multiple types of water heaters available, each with their own set of pro's and con's. While most people are familiar with traditional water heaters, tankless water heaters have recently gained in popularity. This guide will cover the basics of buying a water heater and give you the information you need to make an informed decision.Water Heater Buyers Guide Quick NavigationTraditional Water HeatersTankless Water HeatersWhich Water Heater is Right for You?Traditional Water HeatersTraditional water heaters (also known as storage water heaters) are the most common type of water heater in North America. Traditional water heaters are most commonly powered with either electricity or gas, however, there are other options such as the hybrid heat pump and even solar powered variations.How a Traditional Water Heater WorksA traditional water heater works when the incoming water supply is diverted into an insulated cylindrical tank through the heater’s dip tube. The dip tube "delivers" the incoming cold water near the bottom of the tank where it will be heated.The water is heated by either a gas burner or an electric heating element until it reaches the temperature set at the thermostat. Through a process called convection, hotter water rises to the top of the tank where it can be drawn when needed thru the hot water outlet.The water being drawn from the top of the tank is always the hottest. The cooler water remains until it is sufficiently heated, unless, of course the demand exceeds what the tank is capable of producing. When hot water leaves the tank, more cold water enters, and the heating cycle begins again.When the water near the thermostat’s sensor at the bottom of the tank reaches the desired temperature, the heater powers down automatically. When the water temperature drops below a set level, it fires up again. With a properly sized and functioning traditional heater, you’ll have continuously heated water always available.The water inside the heater is always under the same pressure as the water within the rest of the water supply network.Advantages of a Traditional Water HeaterPrice - A traditional water heater can cost a third of the price of a tankless heater, even with installation expenses.Energy Consumption - Because it stores the hot water until it’s ready for use, a traditional heater consumes its fuel source (gas or electricity) at a relatively slow consistent rate.Disadvantages of a Traditional Water HeaterOperating Cost - Traditional water heaters typically use more energy to operate than tankless models. Therefore, they are more expensive to operate.Standby Heat Loss - Since the entire tank of water is kept hot while it is waiting to be used, over time the water inside will cool. This is called standby heat loss and it happens even with well-insulated tanks. As the water temperature cools, the thermostat will activate to heat the water back to temperature. Even without hot water running from a tap.Recovery Time - When the tank’s supply of hot water is exhausted, a significant delay occurs before sufficiently heated water is available for use.Electric vs Gas Traditional Water HeatersNow that we’ve covered how a traditional water heater works, and we've looked at the advantages and disadvantages, the next topic we need to cover in our water heater buyers guide is the difference between the two fuel sources. How Electric Traditional Water Heaters WorkElectric water heaters typically contain 2 submersed heating elements, which look and function similar to those on an electric stove. One of the elements is located near the top of the tank, and the other is near the bottom. Each has its own thermostat, and while they can be adjusted separately, they should be set to the same temperature. In most circumstances, only one element will operate at a time. The bottom element remains active during periods of minimal hot water use, and it heats the cold water as it enters the tank. Through the process of convection, hotter water rises to the top of the tank (the upper heating element remains dormant, since it is surrounded by hot water and it's thermostat has not been triggered).When hot water is needed, it is drawn from the hot water outlet at the top of the tank. As the water is drawn, cold water enters the tank thru the cold water inlet and then flows thru the dip tube where it is deposited at the bottom of the tank to be heated. When large quantities of hot water are used, the bottom element may not be able to sufficiently heat water inside the tank. If the water at the top of the tank is below the set temperature, the top heating element will activate. When the top element activates, the bottom element turns off.The top element now heats the water nearest to the outlet, which allows hot water to be readily available when the tap turns on. When water at the top of tank is heated to the temperature set by the element’s thermostat, the top element shuts off, and the bottom element turns back on.Advantages of an Electric Traditional Water HeaterLess expensive than gas fueled water heaters.No ventilation needed since combustion gases are not produced.Disadvantages of an Electric Traditional Water HeaterHigher operating expense than gas fueled units.Power outages will prevent the electric unit from heating water. How Gas Fueled Traditional Water Heaters WorkGas fueled water heaters are powered by either propane or natural gas. The cold water enters the tank in the same way as an electric heater and the dip tube delivers the cold water to the bottom of the tank. As the water heats, it rise to the top thru the act of convection and eventually leaves the tank thru the hot water outlet when a hot tap is opened. However, the way the water is heated is very different. A gas unit heats the water with a gas fueled burner that is located at the bottom of the water heater tank. Since combustion gases are produced from burning the fuel, a gas water heater must be ventilated.Gases rise thru 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 control module, also known as a gas regulator. The control module houses a thermostat that controls the ignition of the pilot light as well as an on/off knob to cut the gas to your heater. Advantages of Gas Fueled Traditional Water HeatersLess expensive to operate than electric water heaters.Not affected by power outages. Gas heaters will still operate if the electrical power is out. Disadvantages of Gas Fueled Traditional Water HeatersMore expensive to purchase than electric heaters.May be more expensive to install if venting is damaged or needs to be installed.Fewer options regarding location of installation because of the need for venting. Tankless Water HeatersNo water heater buyers guide is complete without a discussion on tankless water heaters. Tankless heaters, also called instantaneous or on-demand, are fairly common in Japan and Europe. They have gained popularity in the United States over recent years. The rising costs of fuel and the efficiency of these units have contributed to the increased interest of transitioning to tankless units. A tankless water heater will heat the water when there is a demand. If you are taking a shower, the minute you turn on the hot water your tankless will jump into action and cold water will enter the unit, flow thru a heat exchanger and be delivered to your shower head in a snap. Without a tank to store the hot water, there is no standby heat loss. In addition, your tankless is only operating when you need hot water.These water heaters are extremely energy efficient and are available in many different sizes. Size is measured by flow capacity, which is the number of gallons the unit is capable of delivering each minute. It is critical to get this measurement right or your tankless won't be able to keep up with your household hot water needs. Types of Water Heater SystemsThere are two main types of tankless water heating systems used in homes: The point-of-use system, and the whole-house system. There is also a hybrid tankless system available that is a mix between a tankless and a traditional water heater.Point-of-Use SystemThese systems are designed so that multiple small tankless units are installed throughout your home. One unit would be installed in the kitchen, another in the bathroom, and so on. Electric fueled units are usually used since they are smaller and do not require venting.The point-of-use system is advantageous because multiple units can be installed within the home., Since the unit is closer to the tap, the travel time required for the hot water to make its way to the faucet or shower is significantly shortened. A point-of-use unit is dedicated to serving a single location.Installing a single room specific point-of-use water heaters can be used to give your main heater a boost. Frequently, a unit is installed in a bathroom that may not be well-served by a traditional or tankless whole house unit.Whole-House SystemA whole-house water heater system consists of one single water heater that is designed to provide hot water for the entire house. This is the most common type of set up and it is critical that the tankless unit is sized correctly. Hybrid Tankless SystemThere are also hybrid tankless water heaters available. These systems offer the continuous heating feature of the tank-style models, in addition to a small reservoir of moderately hot water that's always available. When hot water is needed, the water in the tank will be quickly heated and then sent to the open tap. Less energy is needed to heat the water within the reservoir since it is already warm.Advantages of a Tankless Water HeaterNo Standby Heat Loss - Since the unit only heats water when hot water is needed there is no energy wasted (standby heat loss) by storing hot water within a tank.Service Life - With proper maintenance a tankless water heater can have a service life of up to 20 years!Unlimited Hot Water - Because a tankless isn't limited by the size of it's tank, if sized correctly, it is capable of delivering a limitless supply of hot water. Compact Design - The compact size of a tankless makes them ideal for small spaces, and they are mounted on the wall so they don't take any floor space.Efficiency - Tankless water heaters are extremely energy efficient, making them capable of delivering long-term energy savings.Disadvantages of a Tankless Water HeaterInitial Cost - As a rule of thumb, buying a tankless water heater and having it installed is nearly triple the cost of a traditional water heater.Installation - Installing a tankless isn't as easy as installing a traditional water heater. It is also more expensive.Venting - A gas fueled tankless will require special expensive venting material.Power - An electric tankless water heater requires a tremendous amount of electricity to operate. You may need to hire a electrician to modify your home's electrical panel. Read our buyers guide on tankless water heaters for a detailed look at how to select a tankless. Also, check out our comparison guide between electric and gas tankless water heaters.Which Water Heater is Right for You?Choosing a new water heater doesn’t need to be overwhelming, especially after reading our water heater buyers guide. Consider your family's hot water needs, and your available fuel source. Of course, your budget will play a big role with your decision. But keep in mind the long-term savings that an energy efficient water heater can deliver over the unit's service life. Check out our other water heater buyer guides and reviews. They should help give you all the information you need to make an informed buying decision.