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On average, a tankless water heater will cost $1,500 to $3,300 with varying labor and installation rates. Tankless water heaters are becoming a popular utility among homeowners. Whether you're interested in increasing your home's energy efficiency, looking to save space in your basement, or just want to get your hot water running faster, tankless water heaters are incredibly beneficial to your home. In this article, we break down how much a tankless water heater costs and if one is right for your home.

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What is a tankless water heater?

A tankless water heater is a unit that produces hot water on demand. With a typical hot water heater, the water is pulled from a tank where the water has been preheated. Tankless water heaters use an electric element or gas burner to heat the water as it travels through a pipe and into your faucet.

How much does a tankless water heater cost?

The upfront cost of a tankless water heater can vary depending on several factors, but here’s what you can expect to pay: Unit cost: An electric unit will cost between $500-$800, while gas tankless water heaters will cost around $1,000-$1,300. An electric unit will cost between $500-$800, while gas tankless water heaters will cost around $1,000-$1,300. Installation cost: The cost of installing the system will depend on labor and the complexity of the process. You should expect to pay a certified installer anywhere from $1,000 to $2,000. The cost of installing the system will depend on labor and the complexity of the process. You should expect to pay a certified installer anywhere from $1,000 to $2,000. Running cost: A gas unit will require annual maintenance while an electric unit will not. You will also be able to save on your energy bills if your system is connected to solar panels.

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Tankless water heater cost factors

Three main factors affect the price of a tankless water heater system: system fuel type, model and size, and the installation process.

System size

The cost of your tankless water heater will vary depending on your system size. Your system size refers to the volume of hot water that your water heater can produce at any one time.

GPM

The water heater system size is measured by GPM, or a gallon per minute rating. Your system's GPM will tell you the gallons of hot water that can be produced at any one time. The higher the GPM that is allocated to your system, the more you should expect to pay. A tankless water heater can supply anywhere from 2 to 12 GPM of hot water. The average system supplies 5 to 10 GPM, which should suffice for most households. Your system's GPM rating is an estimate of its capacity and can vary depending on the desired water temperature as well as your location.

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Fuel type

The two most common fuel types of tankless water heaters are natural gas and electricity. Most homeowners choose to power their tankless water heater through the same fuel source as their home heating system. You can expect to pay substantially more for a gas water heater system compared to an electric tankless water heater. If you’re running an electric unit then you will be able to pair it with a solar system and save on your electricity bill. With the price of natural gas always increasing, electric units and especially solar-powered units will become increasingly popular.

Installation process

The installation cost of your tankless water heater can increase depending on how it is powered and connected. For example, if you're interested in an electric water heater, you'll need to hire an electrician as well as a plumber to install the system. Certain systems may need special venting, while gas models may require a gas line upgrade. Before deciding to install a tankless water heater, be sure to consult a professional and find out what additional upfront installation costs you could be hit with. Unlike other plumbing jobs, installing a water heating system shouldn’t be a DIY project. Seeking out the help of a professional is the best, and most cost-effective, way to get the job done right.

How to determine what size tankless water heater you need

To determine what size tankless water heater you need, begin by assessing which appliances you use the most and add their GPMs together. The total GPM will help you determine what size water heater is best for your home. Flow rates of common household fixtures Fixture Average GPM Bathtub 5.5 GPM Showerhead 2.5 GPM Washing machine 4 GPM Dishwasher 2 GPM Kitchen sink 2.5 GPM

Pros and cons of tankless water heaters

Pros of tankless water heaters

Energy savings

One of the main benefits of a tankless water heater is its energy savings. Compared to a regular water heater, a tankless heater uses anywhere from 30 to 50 percent less energy. This is because the tankless water heater is an on-demand system which means that little to no heated water is left unused. Even if your unit isn’t connected to a solar system, you will still be able to save money on your monthly electricity bill.

Unlimited water capacity

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With a regular water heater, your hot water usage is limited by the tank’s capacity. With a tankless water heater, you may have to wait a few seconds for the water but you will never run out of hot water. This means no more cold showers.

No storage tank

Probably the most obvious benefit of a tankless hot water heater is it requires no storage tank. With no tank, the system takes up far less space and can be installed in your garage, basement, attic, or even outside.

Long lifespan

The lifespan of a tankless water heater system is almost double that of a regular heating system with the average tankless unit lasting close to 20 years. Most manufacturers will attach a 10-year product warranty with new tankless water heaters.

Cons of a tankless water heater

Steep upfront cost

The main disadvantage with a tankless water heater is the upfront costs compared to traditional water heaters. You can expect a tankless unit to cost up to double that of tank water heaters.

Water wait times

With a tankless water heater, you will also have to wait slightly longer for your hot water to arrive. From the time you turn on the faucet to receiving hot water, you may have to wait up to fifteen seconds.

Excess cold water

If you are starting to look into tankless systems, you may have come across the term “cold water sandwich”. This unfortunate phenomenon occurs when the hot water is used in quick succession which causes an initial burst of hot water, followed by cold water which turns hot again. This isn’t a major problem but it could be an inconvenient shock early in the morning.

Tankless water heaters and their compatibility with solar

When a tankless water heater is installed, it can be connected with a solar energy system. The connection process will be an additional cost, but your unit will be powered by clean energy and you may even see savings on your electricity bill. Connecting your tankless water heater to your solar system, provided you have battery storage, means that your hot water will remain on – even during a power outage.