Your Guide to Choosing a New Water Heater

Don't get caught in a cold shower! Replace your faulty water heater with one that's the most cost-effective and energy-efficient for your home.

Hot water has become a necessity in everyday life. How else would you wash your dirty dishes, clothes, and hands? Water heaters play an important role in supplying hot water to your home's fixtures and appliances so they can properly function. Choosing a new water heater is an important investment and can save you money over time with energy-efficient options.

Not sure when to replace your water heater? It's best to consult a plumber for advice on how much useful life your water heater has left. If possible, replace your existing water heater before it breaks down to avoid inconvenient and costly repairs.

Find a water heater that best fits your family's needs and offers energy efficiency with this convenient cost guide.

Water Heater Installation Cost

Most water heaters have a lifespan of 12 to 20 years, depending on the type of water heater and energy source used, and should be replaced before they cause any damage to your home's plumbing or interior. Many homeowners spend between $700 and $1,300 for a new water heater installation. However, it can cost as much as $10,000 to install a new water heater based on the style, fuel type, and size. For example, tank-style water heaters cost an average of $900 for a 50-gallon tank while tankless water heaters are more expensive, costing $3,000 with installation. Another important factor is the type of fuel that powers the water heater. When purchasing a new water heater for your home, consider short-term as well as long-term costs and savings.

Find a Water Heater Installation Service 

Fuel Options for Your Water Heater

Before you choose what type of water heater you want, identify what type of fuel you're going to use: electricity, natural gas, geothermal energy, oil, propane, or solar energy. Consider the recovery rate (how much hot water the water heater is capable of providing in a given time period) for each fuel type to determine which option best suits your home. If more than one energy source is available in your area, compare fuel costs to find the most cost-effective solution. Contact your utility provider for the most current rates.  

Remember, the specific type of water heater can also affect your overall cost, so don't base your decision solely on fuel cost.


Electricity is a popular fuel source for tank, tankless, and heat-pump water heaters due to its energy efficiency. Utility companies may offer special off-peak rates that make electric water heaters more attractive and less expensive to operate. Electric water heaters typically have a low recovery rate of 14 gallons per hour (GPH), which can comfortably accommodate small families and studio apartments. A disadvantage of installing an electric water heater is that it won't work during a power outage, leaving you without warm water for that period of time.

Natural Gas

Natural gas is a common energy source for tank, tankless, and combination water heating systems. Gas water heaters aren't as energy-efficient as electric water heaters, but they have a higher recovery rate of about 50 GPH, which is more than three times faster than electric water heaters. The fast recovery time will sustain enough hot water for a large family of five or more people. Natural gas is generally a less expensive fuel option, especially in the long run.

Geothermal Energy

Geothermal energy is mainly used in homes with existing geothermal heat pump systems for space heating and cooling. Geothermal heat pumps use the earth's natural underground temperature to heat air and water, using much less electricity to move the water through the water heater. Although installing a geothermal heat pump system is an expensive initial investment, you will be rewarded with a much lower energy bill over time.

Fuel Oil

Fuel oil can be used in tank and indirect combination water heater systems. Oil-fired water heaters may have lower operating costs than electric water heaters, but upfront and maintenance costs can be substantially higher. Oil-fired water heaters can also be a risky purchase due to unstable oil prices.


Propane can fuel tank, tankless, and indirect combination water heaters. Like oil-fired water heaters, propane-fired water heaters may cost less to operate, but have higher upfront costs.

Solar Energy

Solar energy is a free and energy-efficient fuel source. It's commonly used in the Southwest where sunshine is more prevalent. Solar water heaters can help increase the hot water available to your home, but they come at a premium price. Solar water heaters usually require a backup system for cloudy days and times of high capacity, adding to your overall water heater cost. You will also have to check your local codes, covenants, and regulations before you decide to purchase a solar-powered water heater.

Types of Water Heaters

Water heaters come in four different styles: tank, tankless, heat pump, and combination. Each type of water heater heats up your water using a different method and can impact your overall cost and efficiency. 

Tank Water Heater

Tank water heaters, or conventional storage water heaters, heat water in an insulated tank. The hot water is released when you turn on the hot water tap and cold water filters in at the bottom of the tank. With a reservoir of hot water on standby, tank water heaters can handle a high demand of hot water with minimal delays. However, tank water heaters heat water even when you don't need it, resulting in lower energy efficiency and higher utility costs.

Tank water heaters cost about half as much as tankless water heaters and are fairly easy and quick to install. These systems have an average useful life of 12 years, compared to over 20 years for a tankless water heater. When installing a tank water heater, keep in mind that the tank takes up a lot of room and must be installed indoors on an elevated platform. Though you can install a tank water heater yourself, we recommend hiring a professional to make sure everything is done safely and is up to code.                                           

Tankless Water Heater

Tankless water heaters, also known as demand or instantaneous water heaters, heat water only when needed, reducing energy consumption significantly. With a tankless water heater, you save about 25 percent on your annual water-heating costs and will never run out of hot water through the heater's 20-year lifespan. However, tankless water heaters are smaller and can't handle the high demands of a large family, such as taking a shower and running the dishwasher simultaneously. If you install a tankless system, gas is the most efficient energy option to heat your whole home.

Tankless water heaters cost twice as much as tank water heaters and are expensive and difficult to install, requiring special piping and venting. Sometimes it's necessary to retrofit your home for a tankless system if the current plumbing is too outdated. Since they are smaller, tankless water heaters can be placed inside, outside, or as individual units for specific appliances. Tankless water heater installation is very complicated and can take up to 10 hours. Hire a water heater contractor to install a tankless system and help avoid potential plumbing problems.

Heat-Pump Water Heater

Heat-pump water heaters use electricity to move heat from one place to another, rather than generating heat directly, and are commonly used to heat and cool homes. Since they don't directly heat water, heat-pump water heaters are more energy-efficient than tank water heaters and some tankless water heaters. Some heat-pump systems come with a built-in storage tank, however you may need to purchase a separate tank if it's not included. These systems have a high initial cost, but have lower operating costs that offset the high price. Heat-pump water heaters must be installed in warm locations, such as a furnace room, to generate heat.

Geothermal heat pumps are another type of heat-pump water heater that draws heat from the ground and uses a desuperheater to heat water. Although a geothermal water heater has a high efficiency rating, it still uses electricity to transfer heat through your pipes and can affect your utility bill. Overall, geothermal heat pumps have a long lifespan, require little maintenance, and operate quietly.

Combination Water Heater

Combination or integrated water heaters use your home's space-heating system to heat water. There are two types of combination water heaters: tankless coil and indirect water heaters. Tankless coil water heaters heat water on demand using a furnace or boiler and are remarkably efficient in winter and cold climates. Indirect water heaters require a storage tank and use a furnace or boiler to keep the tank warm. An indirect system can be the most efficient and least expensive choice if paired with a high-efficiency boiler and well-insulated tank.

Have a New Water Heater Installed 

Water Heater Sizes

Bigger isn't always better -- especially when it comes to water heater sizes. For example, a tank water heater is always running; it will cost more to heat unused water in a larger tank. When deciding what size water heater you need, start by finding your First Hour Rating (FHR). This is how much water you'll use at peak water-usage time, which is usually first thing in the morning when everyone is brushing their teeth, washing their faces, and taking showers. Count the number of people in your household, or number of bedrooms, and add one more. Multiply that number by 12, which is the estimated gallons of hot water per person, to get your home's FHR. You'll want to purchase a water heater with the highest energy factor (EF) in your budget. This information should be available on a yellow label on the water heater.

Water Heater Add-Ons

Not all water heaters are created equally. You may have to purchase additional components depending on your water heater's capabilities and your home's needs. Water softeners and expansion tanks are the most popular water heater add-ons.

Do You Need a Water Softener?

A water softener removes mineral ions that create hard water for clearer, cleaner water. Tank water heaters have more use for a water softener because mineral deposits can build up in the tank. However, a water softener can improve the quality of drinking water from a tankless water heater as well. Water softeners can also extend the life of your water heater and keep it running smoothly and more efficiently. A water-softener system can cost a pretty penny depending on its capacity and quality, but its long-term performance can enhance your water quality for years to come.

How About an Expansion Tank?

An expansion tank accommodates hot water as it expands from heat so your water heater or pipes don't burst from the pressure. Nowadays expansion tanks are required by code for new construction, so if you're building a new house, you're covered. For retrofitting an existing home, many expansion tanks cost $40 to $70 -- a small price to pay for safe plumbing. However, installation does involve gas and electrical lines. Err on the side of caution by working with a local contractor to install your expansion tank.                                      

Find a Local Contractor

More Cost


Loading... Please wait...

Add My Photo close
I Did It!
Share on Facebook
Uh oh! Please pick a jpg at least 600x600px.
Share on Facebook
Uh oh! Your photo failed to upload. Please try again or visit your profile.
No one has shared their photo yet.