Choosing a New Water Heater

Updated: Apr. 09, 2024

New technology can save energy and money

best gas water heater energy efficient water heaterFamily Handyman
We walk you through the pros and cons of high tech water heaters - tankless, heat pump, condensing gas and point-of-use models. They save energy and can save you money as well. When your old water heater dies, consider replacing it with one of these types, as well as efficient conventional models.

You might also like: TBD

Compare water heaters before you buy

Water heater technology is changing—fast! And even though all the new models are more energy efficient water heater models, that doesn’t mean you’ll find them the most cost effective for your family. So before you plunk down big bucks for a high-tech heater, take a minute to understand how each style works, its pros and cons, and its projected payback to best the best gas water heater. Your goal is to find the right balance between performance and efficiency for your particular home. However, if you’re really into numbers crunching, use the worksheets at

First, check the ratings

There are two ratings to check before you buy any heater: the energy factor (EF), which tells you how efficient it is, and the first-hour recovery (for storage water tank heaters) or flow rate (for tankless).

The EF is easy to understand—the higher the number, the more efficient the unit. Interpreting the recovery rate is similar—the higher the number, the more hot water you’ll get in the first hour after opening the spigot. But when it comes to ratings for tankless water heaters, keep in mind that lower groundwater temperatures can sometimes cut the heater’s flow rate by half. So shop for one that’ll provide the flow rate you want, on the basis of incoming winter water temperatures.

Annual Savings by Type of Energy Efficient Water Heater

These figures will vary somewhat with changing prices of gas and electricity. Generally, savings will increase with rising energy costs.

Tankless water heaters

Instead of keeping 40 or 50 gallons of hot water on call 24 hours a day—which wastes energy—a tankless unit heats water only when you need it. A flow sensor detects when you open the faucet. Then the gas valve opens and the burners fire up. The heater measures the incoming water temperature and calculates how quickly the water should flow past the burners. So, if the incoming water is 65 degrees F (typical summer temperature), the heater will provide its maximum flow rate. But if the water is only 35 degrees, the heater will throttle back the flow rate by almost 50 percent. Check with your local utility to find out the water temperature. The average home center price for a tankless heater is $1,000, plus about $200 for a stainless vent.

Tankless Water Heater Pros:

  • Nothing beats a tankless heater for putting out lots of hot water—it never runs out.
  • A tankless heater saves about 30 to 50 percent in energy costs over a conventional gas heater (minimum EF of .82 vs. .54 for conventional).
  • A tankless heater is small and hangs on the wall, freeing up floor space.

Tankless Water Heater Cons:

  • With tankless heaters, there’s a lag time of three to eight seconds to fire up the burners and heat the water to the set temperature.
  • Installation can be a major project.
  • Tankless heaters must be flushed annually with special chemicals to remove scale and maintain energy efficiency. You can do this yourself or hire a plumber (about $125).

What to look for with Tankless Water Heaters:

Shop for one with the highest EF and the best flow rate.

Is a tankless water heater DIY?

You can install it yourself—if you can run a new gas line, follow the venting installation instructions to the letter (and to your local code), install an electrical outlet, and reconfigure the water pipes. It’s a big job.

Is a tankless water heater for you?

If you want an endless supply of hot water for long showers or to fill a gazillion-gallon spa, this heater’s for you. Just be aware that you may not be able to run several showers at the same time in winter. The payback on a professionally installed tankless heater is 16 to 22 years, or six years if you install it yourself.

Tankless Water Heater Details

Tankless water heaters are small and mount on a wall, because they don’t have a storage tank for hot water. They operate off gas and require a special vent.

Hybrid electric heat-pump water heater

Hybrid heat-pump water heaters work by pulling heat out of the surrounding air and pumping it into the storage tank. So if you live in a warm climate and install it in your hot attic or garage, the heat pump alone can save you money. The conventional heating coils come on only when the heat pump can no longer satisfy the demand. If you install the water heater in a heated room, it will suck some of the heat. However, if you heat the house with gas, you’ll probably still come out ahead. Hybrid heat pump water heaters cost about $1,200 – $1,400 at home centers, but prices are dropping.

Hybrid electric heat-pump water heater pros:

An electric hybrid heat pump has the lowest operating cost of any electric water heater on the market, especially when installed in warm climates. They may also qualify for rebates and tax incentives. Go to to see what’s available in your area.

Hybrid electric heat-pump water heater cons:

  • Hybrids cost much more than a conventional electric heater.
  • The heat pump is taller (and wider in some cases) than your existing electric heater. Make sure the unit will fit.
  • Some heaters are “side-piped” to eliminate the possibility of heat pump damage caused by leaking pipes. On those models, you’ll have to reconfigure the water pipes.
  • You’ll have to clean the air filter regularly to maintain operating efficiency.
  • The heater needs at least 1,000 cu. ft. of air surrounding it, so it can’t be installed in a closet.

What to look for with hybrid electric heat-pump water heaters:

EF rating of 2.0 and the highest “first-hour rating.”

Is a hybrid electric heat-pump water heater DIY?

If you can reconfigure the water pipes and connect the wiring, you can install this yourself. But heed this warning: These suckers are big and heavy (about 200 lbs. empty). Get some help!

Is a hybrid electric heat-pump water heater for you?

If you live in a warmer climate and heat water with electricity, an electric hybrid heat pump will save you the most money over a conventional heater. In colder climates, it’ll still save money during the summer when you’re not paying to heat the surrounding air. The higher your electric rates and the warmer the year-round climate, the faster the payback. In many cases, the payback can be as little as four years.

Electric Hybrid Heat Pump Details

The electric heat pump mounted on the storage tank heats the water from the heat in the surrounding air. It has back-up heating coils for periods of high demand.

Condensing gas water heaters

Like conventional heaters, condensing gas heaters have a tank. But that’s where the similarity ends. Instead of sending hot exhaust gases out the flue, which wastes energy, this heater blows them through a coil at the bottom of the tank. Incoming cold water flows around the coil and collects most of the heat. That’s why condensing gas water heaters are so efficient (up to 96 percent thermal efficiency). Even though it’s a storage tank design with “standby loss,” the increased efficiency more than offsets that loss. Condensing gas water heaters cost about $2,000 (from online sources like—home centers don’t sell this style right now).

Condensing gas water heater pros:

  • A condensing gas heater is the most energy-efficient, gas-fired tank-style water heater on the market.
  • “First-hour” recovery rate is incredible—you’ll never run out of hot water.

Condensing gas water heater cons:

  • A condensing heater costs $2,000. Newer models will still cost two to three times more than conventional.
  • It requires gas line and venting reconfiguration.
  • There’s no “real-world” experience on tank life or repair costs.

What to look for with a condensing gas water heater:

Shop for a heater with a thermal efficiency of at least 90 percent.

Is a condensing gas water heater DIY?

If you know how to reconfigure gas pipe, install new venting and add a 110-volt receptacle, you can install this heater.

Is a condensing gas water heater for you?

If you’re replacing an existing gas water heater and need lots of hot water for long or multiple showers and tub fills, and want a high flow rate in summer and winter, this may be the way to go. It requires the least amount of repiping and has a faster payback. Figure an eight-year payback with newer models.

Condensing Water Heater Details

Condensing water heaters are the high efficiency cousins of standard gas water heaters. They operate much like a high efficiency condensing furnace, except that they heat water instead of air. They exhaust to the outside through a PVC pipe.

Electric point-of-use tankless water heaters

A “POU” heater can’t replace your main water heater. But it can cut your water bill by eliminating the waste that occurs while you’re waiting for hot water to arrive at the tap. The heater (which is about the size of a cigar box) installs under the sink and connects between the cold water valve and the hot water faucet. POU heaters cost about $230 at home centers and online.

Electric point-of-use tankless water heaters pros

  • A point-of-use heater reduces water waste and dramatically shortens the wait for hot water.
  • It boosts the efficiency of your main water heater, eliminating frequent cycling from faucets.

Electric point-of-use tankless water heaters cons:

  • A point-of-use heater adds cost to your water heater project.
  • It requires a new 220-volt or 110-volt high-amperage circuit.

What to look for with electric point-of-use tankless water heaters:

The highest EF and best flow rate based on winter water temperatures.

Is an electric point-of-use tankless water heater DIY?

If you know how to run a 110-volt or 220-volt circuit, you can install this water heater. The plumbing is a no-brainer.

Is an electric point-of-use tankless water heater for you?

If you have long runs from the water heater to kitchen and bath faucets, a POU heater is the best solution. A point-of-use heater offers about a three-year payback based on water savings alone.

Electric Point-of-Use Water Heater Details

Point-of-use water heaters fit under a sink and boost the heat of incoming water, so you don’t waste water while waiting for hot water to arrive.

Conventional gas water heaters

Conventional water heaters have improved in recent years. They now have thicker insulation, motorized dampers to reduce heat loss, and an EF of at least .67.

Conventional gas water heater pros:

  • Lowest upfront cost.
  • Easiest to install.
  • No fans or pumps to burn out. Proven reliable over decades of use.

Conventional gas water heater cons:

  • Less efficient; more expensive to run.

Is a conventional gas water heater for you?

If you need an immediate replacement, you don’t plan to stay in your home for years or you just don’t use a lot of hot water, a conventional unit may be your most cost effective option.

Conventional Gas Water Heater

Conventional gas water heaters, although not as efficient, are simple and reliable and may be your best and least expensive option.