Are Tankless Water Heaters a Good Deal?

By: Kurts Registered Gas Hob Installers| Johannesburg|Boksburg, Benoni, Springs, Brakpan|Edenvale.  11-01-2012
Keywords: Swimming Pool, Solar Panels, solar water heating

In the past, I've had comments about , but I hadn't really looked at the numbers to see if this was true or not. Then I saw an article in this month's The Family Handyman magazine that addressed this specific issue. They started by listing the savings you can expect from a tankless water heater:

Tankless water heaters use 30 to 50 percent less energy than units with tanks, saving a typical family about $100 or more per year, depending on water usage.

$100 a year, huh? Not bad. But I needed more details. Luckily, the magazine provided them:

The primary disadvantage is the upfront cost. The smaller units ($500) that you often see won't produce enough hot water to serve most households.

Larger units that can handle the demand of a whole family run $1,000 and up. (Regular tank water heaters cost $300 to $500, and they last 10 to 12 years, compared with 20 years for a tankless unit.)

By this time, I was already doing the math in my head (which you may be doing as well). But there's more to factor in:

But because tankless units have high-powered burners, they also have special venting requirements (a dedicated, sealed vent system, which requires professional installation). Natural gas burners often need a larger diameter gas pipe, which could easily add $500 to $1,000 to the installation cost.

Hmmmmm. This is obviously an issue that needs to be factored in. But before I run the numbers, let's review a couple of parting thoughts from the piece:

The bottom line: When you're pricing a unit, be sure to get an estimate or firm bid on installation costs.

Me? I always prefer a firm bid. "Estimates" have a way of being 10-20% lower than the final, actual cost.

Finally, they throw in this comment at the end:

Ask if the unit qualifies for a $300 federal tax credit.

They make no further mention of this tax credit, but I'm assuming that they're referring to the energy tax credit available the next couple of years for installation of energy-saving products.

Ok, with all the information now in, here's how I looked at the issue:

Right from the start, the tankless water heater looks like a great deal. It could cost up to $2,000 at most ($1,000 for the unit and $1,000 for installation), but it saves you $2,000 as well ($100 a year for 20 years). It pays for itself! It seems like a no-brainer at this point.

But it gets better. The above numbers reflect the worst-case scenario. Let's assume a best-case scenario. Let's say the tankless water heater costs $1,000 and it's only $500 to install. And let's say it saves you $125 per year (the piece does say it saves about $100 or MORE). Finally, let's assume you get the $300 tax credit on the unit (that's $300 savings because it's a credit, not a deduction). In this case, the unit costs $1,200 ($1,000 + $500 - $300) and saves you $2,500 ($125 x 20 years) for a financial GAIN of $1,300. Not bad. Not bad at all!!!!

So it appears to me that a tankless water heater is a great deal if you're in the market for a new water heater -- unless there are some hidden issues that I'm not aware of. Anyone out there have experience with a tankless water heater? What are the pros and cons? I'd love to hear your thoughts in the comments below.

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