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What to consider when buying a new water heater

Water Heater Updated: September 17, 2021

In the market for a new water heater? Use this guide to help you choose the right fit for your home and budget.

Knowing when to upgrade

As anyone who has dealt with a flooded basement before will tell you, the best time to replace your water heater is before you need to. If your tank-style unit is 8–10 years old or your tankless unit is 15–18 years old, it may be time for an upgrade.

Gas or electric?

Deciding between gas or electric largely depends on what is already available in your area and your home. If you don’t already have a gas line or the right electrical circuit for your desired model, be prepared for additional installation costs. As with most major appliance purchases, consulting a trusted contractor or retail associate before making your final decision is always a good idea.

Budget considerations

As water heating accounts for up to 20% of the typical home’s energy use, it’s worth considering the operating costs as well as the initial price. Higher efficiency options may wind up saving you more in the long run, even if they cost more initially. Check the yellow Energy Guide label attached to each water heater to compare estimated annual energy costs.

Types of water heaters

Storage tank
The most common variety of water heater, storage tank water heaters feature a large reservoir of water that is continually heated to a set temperature by gas or electricity. This straightforward design usually comes with a lower price tag, although keeping all that water at the desired temperature typically requires more energy than other models.

storage tank

Rather than continually heating water in a large tank, tankless water heaters only heat water as needed. The result is less wasted energy and no worries about running out of hot water. Tankless units are available as either gas or electric models and come in a variety of sizes, although larger households that use around 85 gallons of water a day or more may require more than one.

While more expensive than conventional tank storage models, tankless water heaters’ lower operating costs, space-saving design and longer lifespan make them an attractive option for those looking for long-term value.

tankless water heater

Hybrid water heater
Hybrid water heaters, sometimes called heat pump water heaters, use electricity to capture heat from the surrounding air rather than generating their own. This makes them far more energy efficient than storage tank models, saving the average household up to $300 a year. Hybrid water heater units feature a supplemental electrical heating system that kicks in when demand for hot water is high. Some models also include smart features that allow you to remotely adjust temperatures and modes with your smartphone, receive failure alerts and more.

All that tech does come with some installation hurdles, though. Because they require more space than other models and can lower the temperature of the surrounding area, hybrid water heaters work best when installed in a garage or another large unconditioned space.

water heater

Solar water heaters include rooftop solar collectors that use the sun’s energy to directly or indirectly heat an interior water tank. Indirect heating generally works better for colder climates, making use of an antifreeze solution that is warmed by the sun before moving to a heat exchanger inside a hot water storage tank. A supplemental gas or electric heat source can provide backup energy for cold or cloudy days, although this can add to the initial installation cost.


Choosing the right size
Determining the right size water heater for your home can be tricky—and sometimes involves a bit of math. Your contractor or retail associate should be able to help you calculate the correct size for your needs. If you’d like to run the numbers yourself, the U.S. Department of Energy has a handy guide.

Incentives available

Energy Trust offers incentives on a variety of high-efficiency water heaters. See if you qualify.

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