Tankless Water Heater Cost / Is It Worth the Extra Money?

You’ve heard a lot of great things about tankless water heaters, and you are considering purchasing them for your home. However, you are wondering whether they can fit your budget. If you want to know more about the tankless water heater costs, you’ve come to the right place!
The crucial thing to keep in mind is that you shouldn’t consider only the initial cost of your heater. Although that is important, you also shouldn’t forget about installation and operation costs. These factors should play a role during the purchasing process.

You also want to ensure to buy the right type of your tankless water heater. That is why we are offering a detailed guide on the price of these heaters, as well as the cost of their setup and operation. By the end of the article, you should have all the information to find a heater that perfectly suits your budget.

7 Factors that Determine the Cost of a Tankless Water Heater

  1. Initial Costs

    If you decided to go with a tankless water heater, you should know that you are choosing a long-term solution and one that is more durable than traditional heaters. The estimated life expectancy of a tankless heater is 20 years, and that is something to keep in mind when considering the size of your upfront investment.
    Now, the price for a tankless water heater varies significantly. You may pay as low as $150 for a single point use unit, but most houses and apartments will require several of these appliances.
    If you are buying a whole house water heater, the estimated cost can vary from $600 to $1,200 more. The price will depend on many factors, and we will consider them below.

    • Size

      The size of your water heater will be one of the deciding factors in its initial cost. That is because the size can affect pretty much everything ranging from the flow rate the heater can provide up to the maximum temperature rise it can achieve.
      The general rule is that large heaters cost more than compact-sized ones. However, they often make that up with better performance. It is all about finding the right balance between what you need and what the heater can deliver.

    • Establishing Your Requirements

      Your requirements are what will determine the specifics of your heater, and that will subsequently affect its cost. Here are some quick factors to consider when figuring out what you need.

      • Flow Rate

        Each tankless water heater can deliver instant hot water. However, the amount it can deliver at once is limited and varies from one unit to another.
        For starters, determine how many fixtures will the heater serve. Here are some general indicators of average water use:

        1. Faucets – from 0.5 to 2.5 gallons per minute
        2. Showerheads – from 1.0 to 3.5 gpm
        3. Dishwashers and washing machines – from 1 to 2 gpm

        You also want to consider the chances of people using the water heater simultaneously. If you have two bathrooms and a big family, you want a high flow rate capacity. On the other hand, if you are living in a single-member household, a modest tankless water heater will do.

      • Temperature Rise

        You will have to do some calculating if you want the temperature of the hot water you receive from the heater to be optimal. Start with the current water temperature, which should be around 50F. If you have the necessary tools, you can measure this temperature, or ask the local provider for information. The water temperature will be higher in warm climates, but also lower in cold climates.
        The next thing to consider is the desired water temperature. It depends on your taste, but you should keep it at around 105F – 125F. Now, subtract the current heat level from the desired one, and you will get the desired temperature rise.
        If your demands are higher, the chances are that the cost of the heater will also be higher. Those heaters with low-temperature rise will have a lower price.

    • Brand

      Another factor that will determine the pricing of your water heater is the brand you select. Now, unknown brands might have a more affordable cost, but they also bring higher risk. You never know whether the quality of the components will be adequate, and how long your heater will last.
      That is why you should stick to reputable brands and companies. For starters, you can be confident you will be getting the components they specified in the product description. Additionally, they usually have strict quality control, which means the risk of something going wrong should be minimized.

    • Ask for Tax Credits

      Tax credits can be a great way to reduce the initial cost of your tankless water heater. Technically, it will not be a price drop, but the opportunity to pay in installments. However, that could mean a lot to your budget, especially if you are buying a large unit.
      At this moment, it seems that the Department of Energy is granting tax credits on renewable energy products to be used in residential homes. The current offer is valid until the end of 2021, and you should consider using it.
      Depending on your states, you may be eligible for a rebate, too, so do not hesitate to ask around for possible options.

  2. Installation Costs

    The upfront investment is something that most purchasers consider, but they often forget about the installation part. More often than not, it will increase the initial cost of the water heater significantly. That is why it is important to know more about labor prices for your heater.
    If you are building a new home from scratch, there won’t be an old system to remove, which can save some money in the process of installation. A professional can suggest the best place for installing your water heater, or you can choose it yourself.

    Once you pick the location for the installation, it is time to prepare the site. Depending on the needs, the contractor might have to open the ceiling or walls. They will estimate this based on the position of your heater, but also the placement of the pipes, and where they can run. If necessary, the plumber may add extra plumbing to ensure the unit can work in the desired spot.

    Depending on the things that the contractor needs to complete, the installation process can last only a couple of hours but also extend to eight hours or more. The general rule is that adding extra plumbing or a new gas line will require more time.

    What Is the Labor Cost When Installing a Water Heater?

    The rate will largely vary from one area to another. Additionally, different contractors may offer different rates. You want to find a professional that you can trust to do the job right, but at the same time, you don’t want them to overcharge you.
    The average rate for a plumber who can install a water heater is $85 per hour. In some areas, they may take as little as $45, but in other areas, they won’t hesitate to charge up to $150 per hour.
    The total installation cost will also depend on the time needed to complete the process. If it is a simple electric unit, it shouldn’t take more than a couple of hours to install everything. However, if the plumber needs to set up a new gas line, install additional plumbing, or it is a tricky installation process, project duration may extend.
    In some cases, the entire installation process can take the entire working day – eight hours. If we do some simple math, we will conclude that the installation might cost you only $90, but the price may also increase to $1,200.

    What Are Some Other Costs During the Installation?

    Here is a list of some other costs that may appear during the installation process:

    • Installing a new gas line – the average cost of a gas line is around $500. You may want to add permit expenses if your local regulations require it, and that cost could be around $200-$300.
    • Finishing touches – you want your installation site to look beautiful, which means you might need to use some drywall for finishing touches. It means you can calculate an additional $100-$200 for that purpose.
    • Extra materials – you may choose a location where additional pipes are necessary to connect the heater to the piping system. The piping cost is usually around $10 per foot, and you may also consider the added insulation, which shouldn’t increase the cost much.
    • Configuration – if you are installing electric water heaters, the contractor will need to ensure that your system can handle the needs of the appliance. They will assess voltage requirements and may figure out that some electrical updates are required. Apart from the materials, this may also require an electrician, which also charges around $85 per hour.
    • Detaching the old heater – depending on the area and the complexity of demounting, the price can go up to $500, including the disposal costs.
    • Permits – you need to check your local regulations to see whether you can install that particular type of heater on your property. Some heaters may require obtaining a permit before you can start the installation projects. The cost for this permit varies from one area to another, but it might be around $250.
  3. Operation Costs

    Once the setup of your tankless water heater is completed, everything will be ready to start utilizing instant hot water directly to your shower or faucet. But have you ever wondered about the cost of using a water heater? Let’s take a look and try to analyze the factors that affect the price of running these appliances.

    Environmental Impact

    If you are a person that cares about our planet, the environmental impact of your water heater will be a question if integral importance. The energy factor (EF) will also have a great effect on the cost of running a heater in your home.
    You can calculate the energy efficiency of a tankless water heater by using the quantity of hot water that your heater produces per fuel or model during a normal day.

    That includes the factors listed below:

    • Efficiency in recovery – it describes the efficiency of transferring the heat from the heating element to the water itself.
    • Cycling losses – the water will circulate through the pipes, and this describes the heat loss as it moves through them.

    We also have so-called standby losses, but they only apply to traditional water heaters, so we will not consider them for now.
    However, we will talk about actual energy efficiency. It comes in the form of an energy factor rating, which significantly varies depending on the heater type and unit.
    For example, traditional water heaters usually have energy efficiency around .60. If you transfer that into something that even newbies would understand, it means that they use about 60% of the generated energy. The remaining heat remains unutilized because it disappears in the process.
    That is the reason why those that care about the environmental impact move toward tankless water heaters. Their energy efficiency is rarely below .80, and you will find units that go up to .99. You can consider looking for Energy Star certified units as that is an indicator that the heater is in line with the energy efficiency standards.

    How to Calculate Annual Operating Cost of a Water Heater

    We might have learned how to establish the energy factor of a water heater, but that is only the beginning of the process of determining the annual cost of running the appliance.
    The heater size will play a vital role in determining operation costs. The general rule is that a small water heater will utilize significantly less energy than a large one.
    You will need to choose the desired type of fuel for your water heater and calculate the estimated fuel cost for your appliance. When doing this, you will require the current rates in your area, which you can receive from your local provider.

    • Oil and Gas Water Heaters

      The estimated operating cost of gas and oil water heaters on an annual level can be calculated by using the following equation:
      41045 x 365 / Fuel Cost (in BTU) x EF
      As you can see, you have to know the fuel cost of the unit in British Thermal Units (BTUs). Alternatively, you can use the Therm unit (100,000 BTUs equal 1 Therm). In that case, you will use the following equation:
      0.4105 x 365 / Fuel Cost (in Therm) x EF
      The number you receive will tell you the estimated running cost for an entire year. Keep in mind that this calculation applies to “standard” use of your water heater.

    • Electric Water Heaters

      For this calculation, we will also need to learn the electricity cost for the unit in kWh (kilowatt-hour). Once you have that ready, here is the formula:
      12.03kwH x 365 / Fuel Cost ($/kWh) x EF
      You can see that we provided an estimated energy use on a daily level. The number in the formula was calculated for the 58F temperature of incoming water, and 135F temperature of hot water. The estimate provided supply of water is 64 gallons per day. That amount of water should be enough for an average three-member household.

    The operation costs mentioned above do not consider repair and maintenance expenses. Apart from your regular inspections if something is wrong, you should also have a professional perform a water heater checkup at least once every year.
    A plumber might charge you anywhere from $40-$80 per hour for maintenance services. Additionally, you should calculate the material for the repair cost, which can significantly vary.
    In the end, it is worth noting that tankless water heaters should be a better option compared to traditional heaters when it comes to energy efficiency. Thanks to that, you might save around $100 per year or more on operation costs.

Whole House VS Single Point Water Heater Costs

The next consideration will be using a whole house water heater against a single point heater.
Your first option is a whole house appliance, which should secure hot water for all fixtures in your home. That includes all showers, faucets, washing machines, dishwashers, and other fixtures.
As you might assume, you will need a heater of suitable capabilities to accommodate all these fixtures. You will particularly need to considerate situations when multiple members of the household might be using the water from the heater. The flow rates the appliance can provide needs to match the needs of all members.
The alternative lies in using a single point water heater, which some also call a point of use appliance. As the name suggests, it only serves a single fixture, which means you can use it for a faucet, shower, or a washer. These units are smaller and suitable to fit in small spaces.

Cost Considerations for Whole House and Point of Use Water Heaters

Whole house water heaters are big and powerful, which means their price is higher than the cost of single point heaters. The cost, however, may vary depending on the size of the unit and its features.
On the other hand, single-point water heaters are compact, and an excellent choice for small spaces, and residential properties used by a single person. Since they are smaller and not as powerful as the whole house units, their price is usually more affordable.

How to Choose Between These Heaters Based on the Cost

Both heaters can be a great choice as long as you see them fitting for your property. If you are living in an existing apartment or home, the chances are it will be difficult to install a new gas line. You also might have difficulties with making adjustments to your current gas lines.
All these may limit your choices when it comes to utilizing single point water heaters. Instead, you may want to focus on a whole-home unit. You might call a qualified expert to discuss the opportunity of installing a tankless water heater on the outside of your home. It is a relatively new system, and you will have to ensure that you buy an anti-freezing unit. However, this option can be a good choice for your needs.

What about New Construction?

Building homes from scratch gives you a lot more option when choosing the entire setup for the house, and that includes picking the right water heater. You shouldn’t have any problems with using single point water heater or installing a suitable gas line or electric wiring.
You should keep in mind the actual construction of the home. When using a whole point unit, the heater will do the heating in a single location, and then hot water moves through the pipes to the user. In especially big homes, heat loss may be a problem. That especially applies when you turn off the shower, and the water remains in pipes.
It is why large new homes might consider zones with different water heaters. It may increase the initial investment, but it also secures significant savings when it comes to energy.
If you do the math, you will realize that three compact-sized units will utilize less energy than a single huge unit. We are talking about long-term calculations, and that should prove to be true for most homes.

Consider Usage Patterns

We already mentioned, but choosing the right water heater and optimizing operating costs will depend on the needs of your household. A four-member family will use a lot of hot water in the morning, and the same applies to parents that spend the entire day home with children. Weekends or evenings can also be periods with high use of water. If this is your situation, there is no doubt you should go with a whole house water heater.
However, you may have a pattern where household members mostly use water in a single section of the house. For example, you may use the main bathroom and kitchen, while the guest bathroom is mostly empty, as well as that jetted tub on the patio.
It is in this scenario when zoning your home can provide improved energy efficiency, and save on utility bills. Pick a strong heater for the area you frequently use, and point of use units should be enough for zones you only use sporadically.
Here is another important consideration regarding your fuel choice. If you are determined to go with gas as the preferred fuel, you should keep in mind that whole house units may be a better choice. The reason is that it is more affordable to supply gas to a single than to multiple locations.

Methods for Fueling Your Water Heater

Apart from the type and features of your water heater, you should also choose the preferred fueling source. Let’s take a look at different options and their pricing, but also other considerations.

  • Electric Water Heaters

    If you choose electricity as your desired fuel type, the chances are you will find an affordable unit on the market. The price of electric tankless water heaters is generally lower than the ones using gas.
    However, you should know that the operation costs are higher in electric units than in propane or natural gas ones. Apart from that, the heating element might not be as efficient, which can additionally contribute to the increase in expenses.
    The general recommendation is to use electric water heaters in small or modest properties. In those surroundings, you shouldn’t feel the difference in utility bills too much.

  • Propane Water Heaters

    These units use a gas burner to do the heating. It is important to ensure that any byproducts can safely exit your house. That will prevent the risk of an explosion or health hazards.
    Proper installation is a must, but as long as you handle that, you can enjoy using units that have relatively affordable running costs. Due to the fact that you need to secure a propane tank to power the heater and a gas line, your initial investment may increase. However, if you already have these ready, you might even save on installation costs.

  • Natural Gas Water Heaters

    Their working process is similar to one of propane water heaters. If you are going with gas fuel, it is only logical to choose natural gas.
    However, you will need access to a natural gas line to use this fuel. If you are in a location where that is possible, go for it because of the affordable running costs.

  • Other Heating Methods

    Here are some other fueling methods you may want to consider using for your water heater:

    • Oil – you can consider this as an alternative to natural gas. You will also need a large tank to store oil and deliver it to the heater.
    • Solar – this water heater uses the heat it gets from the sun. You will probably have to place a panel on your house rooftop to absorb the heat. From there, that energy is transferred and used to heat the water. You can combine solar energy systems with electricity or gas, and it may secure significant energy savings.
    • Heat pump – another option used by hybrid water heaters. It utilizes heat absorbed from the air, but it also requires electricity to heat the water. These pumps can help you to save compared to classic electric heaters. However, they will have trouble heating the water in cold climates.

    Ultimately, your decision will depend on your needs and preference. You should consider the climate, as well as the specific requirements of your property. Based on that, you can calculate the costs of using different fueling methods and choose the right one.

Is Installing a Water Heater a DIY Project or You Should Hire a Pro?

You may be confident in your DIY abilities, and you may have years of experience with home improvement projects. However, installing a water heater is not a DIY project, especially if you don’t have any experience with water heaters. It means you shouldn’t consider doing this unless you are a certified expert yourself.
The reason is that it might take knowledge from various fields to complete the installation process. For example, you may need to set up an entirely new gas line or adjust electrical wirings. All these are dangerous projects that can lead to injuries and other serious consequences. Furthermore, the local law might require that only certified professionals handle them.

Additionally, hiring a qualified expert is the only way to ensure everything will be installed properly. First, that ensures your heater will work the way it should, and provide hot water whenever you need it.
Apart from that, you can also rest assured that nothing will go wrong due to installation flaws because there won’t be any. It means no danger of potential explosions, monoxide emissions, and other potentially dangerous issues.

Finally, a certified professional can be in your corner during the entire process. You might need them for advice when choosing the right water heater for your home. They can also help you to choose the right location for your appliance.

How to Install a Tankless Water Heater

It is crucial not to do this yourself, but if you want to know more about the process, here are the steps that are usually taken when installing a tankless water heater.

  • Step 1: Buying the Equipment, Estimating Steps, and Obtaining Permits

    The first thing you want to ensure is to purchase the heater itself, as well as all any installation materials and equipment you might need. A professional you hire will have some of the necessary equipment, so make sure to discuss the requirements with them.
    Your installer will estimate the steps needed to complete the setup process. Based on that, they might ask for additional materials.
    Once you have established the course of action, you need to check if you have all the permits. You don’t want to pay fines, which is why you should ensure you meet the local regulations.

  • Step 2: Prepare the Location

    Think about the best spot for your water heater. You should consider maximum efficiency, but also ease of installation. Additionally, tankless heaters do not take a lot of space, but you still want to ensure you can access them easily in case there is a requirement for a repair.
    You can install a tankless heater against the drywall, or place it into the wall. That depends on the specifics on the location, as well as your preference.

  • Step 3: Install the Water Heater

    The next step is actually to place the water heater in the desired spot. You want to make sure to connect the heater to the supply pipes to secure that the appliance can receive the water. Connect the pipes properly, and place shutoff valves on both inlet and outlet. Finally, consider adding a valve to release pressure.

  • Step 4: Handle the Finishing Touches

    It is time for the final step of the installation process. It is time for water valves to be open, and you should also ensure to open all the fixtures that the heater covers.
    Leave the water running for about a minute, and turn off the valves. Now, find the inline filter and remove it, and clean any residue. Once you replace the filter, it is time to activate the fuel source. Make sure that everything is working properly.
    If necessary, do some finishing touches, such as using drywall to add to the aesthetics of the room.

Traditional Hot Water Heaters VS Tankless Costs

This particular guide focused on tankless water heaters. However, you should know that you have another alternative available. It comes in the form of conventional or traditional water heaters. These are specific because they require a tank.
Let’s make an overview of both unit types so that you can learn more about each of them.

  • Traditional Hot Water Heaters

    As we mentioned, these units have a tank where they store water. Once they are on, they will heat the water and keep it hot until there is a need to use it. After activating the system, the water will flow through the pipes to the user.
    The storage tanks usually have a capacity from 30 to 100 gallons, depending on the size that you select. That will also affect the price, but conventional units are relatively affordable regardless of their size.
    It is important to keep in mind that you can only use the hot water available in the tank. If you run out of hot water, it may take up to a couple of hours for the unit to recharge.
    They are also easy to install and repair, and they shouldn’t be a big hassle to maintain. However, since they have a shorter lifespan than tankless units, it may require frequent repair.

    Traditional Hot Water Heaters Pros and Cons

    • A simple system that can be easy to set up and repair
    • The initial cost can be quite affordable
    • Their lifespan is somewhat shorter than the life expectancy of tankless units
    • A limited supply of hot water before the need to recharge
    • They tend to be big and require a lot of space
    • The utility bills can be quite high due to low energy efficiency
  • Tankless Water Heaters

    The main difference and advantage of a tankless water heater compared to the traditional method is that it doesn’t require a tank to work. Thanks to that, you can place a tankless heater in small spaces as it doesn’t take a lot of room.
    If you care about having an eco-friendly appliance, a tankless water heater is a good bet. Most of these units have admirable energy efficiency. That fact will also secure your affordable utility bills, and considerably lower operating expenses than those in traditional water heaters.
    The great thing about tankless water heaters is that they secure an endless supply of hot water. Since they work based on the on-demand model, they will provide the hot water as soon as you turn on the heater. You can use hot water for as long as you like.
    As for the cost, the initial investment will be higher than for a conventional unit. The utility bills will be low, but it might take a long time before they secure a payback to the upfront investment.

    Tankless Water Heaters Pros and Cons

    • Environmentally friendly and energy-efficient
    • Low utility bills
    • Amazing life expectancy of around 20 years
    • Suitable to use in small spaces
    • Secure instant and an endless supply of hot water
    • The relatively high upfront cost
    • The energy savings might take a while to secure payback to the initial investment
    • The installation process can be a bit complex


  • Q: Are Tankless Water Heaters Worth the Cost?
    A: Tankless water heaters are pricier than traditional units. However, they have their advantages. In terms of price, that may be a more affordable operation cost, as well as their life expectancy.
    Tankless water heaters last for two decades, which is good because it will take a significant time for your savings to pay back the upfront investment. However, if you care about the environment, and it seems like tankless water heaters are the right fit, there is no doubt they are worth the cost.
  • Q: What Is the Total Cost of Setting up a Tankless Water Heater?
    A: We discussed that in our article, but there are two factors that you need to consider. Before you can start using the unit, you need to pay the cost of the heater itself, and also take care of the installation costs.
    The cost largely varies depending on the unit you select. If you choose several single point heaters, the upfront cost can be about $500, while a large whole house unit may cost up to $1,200.
    As for the installation cost, it can vary from $200 to more than $2,000. That leads us to the conclusion that the total cost of setting up your heater is anywhere between $700 and $3,200 or more.
  • Q: What Is the Optimal Temperature for a Tankless Water Heater?
    A: The recommendation is to keep the temperature of your hot water at around 120F. According to the experts, it is what will ensure optimal efficiency while keeping maximum safety.
    You can use the water up to 140F, but anything above that might be too hot and wasting energy, as well as money.
    For tankless water heaters, it is important that the temperature rise capabilities of your unit match your needs. It is the only way you will ensure maximum comfort and pleasure of using your water heater.
  • Q: Do Tankless Water Heaters Work without Electricity?
    If you are using an electric tankless water heater, it will only work if it has electricity. Otherwise, you won’t have hot water at your disposal.
    However, if you are using gas or an alternative energy source, you might be able to get hot water even in cases of power outages.

Wrap Up

It is not easy to calculate the total cost of a tankless water heater because there are so many factors you need to keep in mind. The first one is the upfront cost for the model itself. However, it is essential to consider other factors, too.
Installation costs can significantly increase your initial investment into a water heater. You should also consider operating costs because you don’t want an appliance that will skyrocket your utility bills.
We hope that our guide showed you how to choose a suitable water heater depending on its cost. The article tried to cover all details regarding different features and their pricing, as well as other considerations.
It is important not to rush your decision when choosing a tankless water heater. After you make sure it is the right type of heater for your home, make sure to select the features that meet your expectations. That way, you will get a unit you will be delighted with, and it will serve you for years!

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