Water Heaters

Exploring the True Cost of On Demand Water Heaters


Exploring the True Cost of On Demand Water Heaters

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When we think about appliances that add comfort and convenience to our life, the humble water heater ranks pretty high. Especially the on demand water heater that supplies hot water instantly. Strategically opting for this type of water heater can prove beneficial in several ways. However, it is the cost that often makes us think twice. So what is the cost of on demand water heater? It varies, depending on different factors such as the model, the brand, the size, and the installation technique required. But don't worry, in this article, we will break down the various cost components associated with an on demand water heater. Armed with this knowledge, you will be in a strong position to make an informed choice.

The Basic Cost

Primarily, the first thing to discuss is the basic cost. These compact wonders come in a reasonably wide price range depending on the brand, size, and fuel source. Typically, a tankless water heater costs between $250 to $2,000, without installation. The prices are as varied as the products themselves, but keep in mind that this is just the upfront cost.

Installation Cost

Another significant cost is installation. Installation costs can vary depending on several factors:

  • The type of water heater (gas or electric) you choose
  • The complexity of the installation process
  • Local labor rates
  • Any necessary upgrades to your existing system

On average, the cost lies between $800 to $1,500. However, if major updates are needed, the installation cost can rise to as much as $2,000.

Operational Cost

Next, let's talk about the operational cost of on demand water heaters. This cost largely depends on the type of fuel source used. Gas heaters generally have higher operational costs than their electric counterparts. A gas model may require yearly maintenance which can average around $100 annually. Electric models usually have less maintenance needs, therefore their operational costs are less.

Gas Vs Electric

As we compare cost of gas and electric on demand water heaters, we see that a gas-powered model is more expensive initially but it can be cheaper to run over time whereas electric models cost less upfront but can result in higher operating expenses. An electric tankless water heater unit costs around $500 to $700, and a gas-fired unit costs between $1,000 to $1,200.

Energy Saving

Though the initial cost of an on demand water heater is high, the benefit lies in its energy-saving capacity. These units can save up to 30% more energy compared to traditional water heaters. The U.S. Department of Energy estimates that for homes that use 41 gallons or less of hot water, on-demand tankless units can be 24%–34% more energy efficient than tank models. Therefore, the overall operational cost can be significantly reduced, helping to offset the initial cost.

Long-term Cost

When calculating the cost of an on demand water heater, it's crucial to consider the long-term costs. These water heaters have a longer lifespan of 18-20 years compared to 10-15 years for traditional heaters. Therefore, the return on your investment in a tankless system can be highly advantageous in the long run. Considering cost per year, annual energy savings, and longer lifespan, the overall cost may balance out.

Just remember, the cost of on demand water heater varies a lot depending on brand, model, size, type, installation requirements, local labor rates, and even where you live. Therefore, it's important to get detailed quotes before you make your decision.

FAQs: Cost of On-Demand Water Heater

Why are On-Demand Water Heaters Cost-Effective?

On-demand water heaters, also known as tankless water heaters, only heat water as it is needed, making them a cost-effective choice in the long run. Unlike traditional water heaters that continuously heat stored water, on-demand water heaters can help save on energy costs as they eliminate the need for reheating the tank's water.

What is the Average Purchase Cost of an On-Demand Water Heater?

On average, the purchase costs of on-demand or tankless water heaters range from $500 to $2,000, depending on the brand, model, and size. It's important to note that although the initial purchase cost may be higher than traditional water heaters, the energy savings can recoup this cost over time.

What are the Installation Costs of On-Demand Water Heaters?

The installation costs of on-demand water heaters typically range from $1,500 to $2,000. This pricing estimate can go up or down depending on factors such as your area's labor rates, whether your home needs additional retrofitting to accommodate the new system, and the specific water heater model you choose.

How Can Energy Savings Offset the Cost of On-Demand Water Heaters?

Because on-demand water heaters only heat water when you need it, these appliances use up to 50% less energy than traditional water heaters. That means potentially big savings on your energy bills. Over time, the savings can cover, and often exceed, the initial costs of your on-demand water heater.

What Factors Can Impact the Operating Cost of an On-Demand Water Heater?

Several factors can impact the operating cost of an on-demand water heater including the unit's size, efficiency, and your household's water usage. The energy source (gas or electric) and local utility rates also directly affect the cost.

Are There Additional Costs Involved with On-Demand Water Heaters?

In addition to the purchase and installation costs, you might also have to budget for the costs of maintenance and repairs. Some homes might require an electrical system upgrade or additional venting, which will add to the initial cost of an on-demand water heater. Additionally, hard water may require you to install a water softening system to prolong the life of your on-demand water heater.

What is the Expected Lifespan of an On-Demand Water Heater? How Does This Affect the Cost?

An average on-demand water heater has a lifespan of 20 years or more, nearly double that of conventional tank heaters. Though the upfront cost is higher, when spread out over a longer lifespan, an on-demand heater often costs less in the long run.

Will Switching to On-Demand Water Heater brings cost savings?

A transition to an on-demand water heater can certainly bring cost savings in the long run. By only heating the water as needed, you cut down significantly on energy costs. Despite initially high setup costs, the energy savings over the estimated 20-year lifespan make an on-demand water heater a cost-efficient choice for many households.

Are there Any Rebates or Incentives to Offset the Cost of On-Demand Water Heaters?

Yes, various government incentives, tax credits, and rebates may be available to homeowners who choose energy-efficient appliances like on-demand water heaters. The availability and amount of these incentives vary by location and the specific equipment, so it's worth investigating if any apply in your circumstances.

Pros of the Cost of On Demand Water Heater

Energy Efficiency

One of the significant advantages of the cost of on demand water heaters, also known as tankless water heaters, is its energy-efficiency. Due to their design, they only heat water when it is needed, which means no energy is wasted on keeping a tank of water hot all day. This factor can spell significant savings on your energy bills over time.

  • Can save up to 20% on energy bills compared to traditional water heaters.
  • Can qualify for federal tax rebates and incentives for energy-efficient appliances.


On-demand water heaters tend to last longer than traditional tank-style heaters.

  • A well-maintained tankless water heater can last up to 20 years, almost double the lifetime of a traditional heater.

Space Efficiency

The compact size of an on demand water heater also saves a significant amount of space in your home.

  • Eliminates the need for a large water tank.
  • Can be fitted in tight spaces and even outside the home.

Unlimited Supply of Hot Water

They offer an endless supply of hot water, which is not usually the case with traditional tank heaters.

  • No more cold showers if you are the last to bathe in the house.

Cons of the Cost of On Demand Water Heater

Upfront Cost

One of the noticeable disadvantages of on demand water heaters is the high initial cost. The purchase, installation, and setup of these systems are relatively expensive.

  • The cost of an on demand water heater is usually more than double the cost of a traditional water heater.

Upgraded Gas Line

If you are switching from an electric water heater to a gas on demand water heater, you might need to upgrade your gas line, which requires an additional cost.

  • The cost for upgrading a gas line can vary drastically based on the length of the line and the complexity of the job.

Limitation on Simultaneous Usage

While on demand water heaters can provide an endless supply of hot water, they cannot provide hot water to many outlets simultaneously. If you have a large family or many bathrooms, you may need multiple units, which increases costs.

  • Simultaneous usage limitation poses a challenge for households with high hot water demand.

Maintenance and Repair Costs

On demand water heaters require regular maintenance and can be costly to repair. Hard water can cause scale buildup that reduces efficiency, and parts can be expensive to replace.

  • Regular yearly maintenance is recommended to ensure the longevity of an on demand water heater.

While the high upfront cost of an on demand water heater might deter some, the long-term energy saving, combined with the potential for tax rebates, provide a counterbalance. But, keep in mind that maintenance costs, potential limitations, and installation costs should also factor into your decision.


Every homeowner needs to weigh the pros and cons before deciding on the right water heater for their household. It's important to highlight that the cost of on demand water heater can be a major deciding factor. Sure, the upfront costs may be higher than conventional models, but when considering the long-term savings from lower energy bills, it can be a wise investment. Furthermore, factoring in the lifespan of an on demand heater, it's easy to see the financial benefits.

Let's not forget about the lifestyle benefits provided by an on demand water heater. Who wouldn't appreciate having a constant supply of hot water, right at their fingertips? Despite the cost of an on demand water heater being more than a traditional one, its convenience and energy efficiency are certainly worth considering. It eliminates the wait for hot water and the worry of running out, providing a comfort that can't be quantified in monetary terms.

Above all, the cost of on demand water heater should not be the sole deciding factor. Other aspects such as energy savings, lifespan, and convenience should also be at the forefront. Sometimes, investing a little more upfront can bring forth greater rewards in the future. After all, a water heater is not a spontaneous purchase but a long term investment. So, make sure to factor both the immediate and ongoing costs when making your decision.

About West Coast Hydronics & Plumbing

Welcome to West Coast Hydronics & Plumbing, your reliable plumbing partner located in the heart of Sacramento, CA. We pride ourselves on our top-notch services, dedicated team, and our commitment to customer satisfaction. Having carved a niche for ourselves in the plumbing industry, we consistently strive for the highest standards. Experience is our forte, with several years of serving the diverse plumbing needs of Sacramento residents under our belt. We believe every problem has a solution, and that's exactly what we offer to our esteemed customers. Visit our website to learn more about us or to request our excellent services. We are more than ready to serve you.