Tankless Vs Tank Water Heater: How Does It Work?

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Last updated: 
October 22, 2018

Water tap with hot water steam

If you're in the market for a new water heater, it's good to know you have options. Two such options are tankless vs. tank water heater. There are definite differences between the two; however, they both work well to provide your family the hot water it needs. What are the differences and which works better?

What Is a Tankless Water Heater System and How Does It Work?A tankless or on-demand water heater is a component that heats your water as you need it. Traditional tank water heaters keep a constant amount of water hot at a time.In an on-demand, instant system, the water flows through a heating element as it is turned on in the home. In this way, the supply of hot water never runs out. In a tank water heater, once the hot water inside the tank is gone, the tank refills and makes that water hot.There are periods of time, therefore, if you have a tank water heater that you may be without hot water when you turn on the tap. It can be highly inconvenient, especially when trying to take a shower or do a load of laundry. There is almost nothing worse than getting into a cold shower when the nozzle is turned all the way to hot. There are a few factors to consider when deciding between these two types of water heaters for your home.

Things To Consider When Choosing A Hot Water Heater

woman taking a bath

What Type Of Fuel Will Power It?

The first step in choosing a water heater of any type is knowing what fuel will power it. Knowing this helps narrow down models by the fuel's cost and availability. For instance, if your home has access to natural gas, then you have a choice between using that or electricity for either a tankless or tank system. On the other hand, if your home only offers electricity, then you can focus on just those hot water units.Over time, fuel costs ebb and flow, especially gas prices. While they are typically lower than electricity, in the winter they can spike due, in large part, to the demand for heat. Therefore, it's good to know what you may be looking at long-term for operating costs using one fuel versus another. Also, it's good to keep in mind that some appliances are just more energy efficient when utilizing gas versus electricity and vice versa. If you do have more than one fuel option available, it's a good idea to take some time to evaluate what operating costs might be long term.While there are other options (vehicle gas, geothermal, solar, propane), natural gas and electricity are the two most prominent fuel choices available in hot water heating systems.

How Big Is Your Home?

All water heaters, tank or otherwise, have recommended sizes based on the internal square footage of the home and usage. If you don't buy the system that will be sufficient enough to run your household, you could run into huge inconveniences down the road.

Tankless Option

Tankless water heater

When sizing an on-demand system, you need to know flow rate and desired temperature rise. To try and reach this figure, consider the number of items in your home that may need hot water at one time including showers, faucets, bathtubs and washing machines. If your dishwasher is self-heating, then you don't have to include that in with the count.

Flow Rate

In physics, you might remember learning that flow rate is the volume of liquid that passes through something over a period of time. In general terms, it's the average amount of water a fixture of appliance generates when you turn it on. To arrive at a general flow rate for the tankless unit, you need to add up the typical flow rates for the items you've listed as being in your home. The average flow rate for a faucet is 1.0 to 1.5 gallons of water a minute. The flow rate of a standard shower is 2.1 gallons per minute (and the usual shower lasts for around 8 minutes, which is important to remember when sizing any hot water tank system). After getting the flow rates for your listed items, add up the two or three things you would possibly use at one time to arrive at the average gallon per minute requirement for a tankless unit.

Temperature Rise

The average temperature of incoming water to a hot water heating system is around 50 degrees Fahrenheit. Keep in mind if you live somewhere that gets very cold in the winter, this number will be lower during those months. To determine the temperature rise, the incoming water temperature is subtracted from the ideal heated temperature of the hot water heating unit. The recommended temperature setting is 120 degrees Fahrenheit. Therefore, the average temperature rise is 70 degrees.

Here is where you may also see a difference in units based on fuel types. A gas-fired tankless heater may have the 70-degree rise at a rate of 5 gallons per minute. Its electrical counterpart may also have the 70-degree rise, but only at a flow rate of 2 gallons per minute.


  • Provides hot water virtually on demand
  • Takes up less space than a traditional tank water heater
  • Lasts for more than 20 yearsMight save you up to $100 per year in energy savings


  • May be strained if too much hot water is demanded at a timeMore expensive than a tank heater
  • Installation is very costly

Tank Water Heater

tank water heater

When choosing a tank system, you need to consider a slightly different usage barometer than the one set forth above. Something called the first-hour rating dictates the size of the tank hot water heater.Each tank system indicates a first-hour rating guide that gives the average amount of hot water the system can supply to the home in one hour if the tank is full. This rating relies heavily on the fuel, size of the tank, source of the water and usage in the home.To determine the average amount of hot water you would need in an hour, consider the following:

Peak Demand Time

Think about the time of day when your household uses the most hot water at the same time. Most experts suggest the morning is the peak time; however, this may not be the case in your home. A peak time would be when the most showers are taken. If you have a family with four children, and all four bathe at night, then consider that hour as your peak hour. If you use the flow rate and average time stated above of 2.1 gallons per minute for an 8-minute shower, that's 16.8 gallons of hot water per person. If it is used by three children in that hour, that's 40 gallons per hour in just the shower. Kick in the load of laundry you may be doing (an average of 7 gallons per load) and the faucet running to wash the dinner dishes (1.2 gallons per minute), your first-hour rating may be, on average, 50 gallons.In the above example, a 50-gallon capacity tank would be the minimum size water heater for the home. If you have fewer people and your peak consumption hour puts out substantially less hot water use, then 40 gallons is sufficient. The first-hour rating guide is essential in trying to assure yourself, and your family, hot water will be ready when needed. If your tank only holds 40 gallons and you need 50 in that hour, chances are the last person is getting a colder shower.

When it comes to deciding on which hot water system to purchase for your home, it's a good idea to consider the good and the bad of each type.


  • Reasonably priced
  • Works with the piping in the home
  • Functions well if the proper size


  • Lasts only 10 to 15 years
  • Hot water may run out depending on usage
  • May leak if there are issues
  • Takes up space

If you are a household that runs on less than 41 gallons of hot water per day, then a tankless system may wind up being the most cost-effective way to heat your hot water both short and long-term. The cost is due, in large part, to the unit size. The smaller the unit, the less expensive installation and long-term usage may be. However, if you are a family of three or more, you will require a larger tankless system or a storage tank may be the better option.The choice between tankless vs. tank water heater comes down to family usage and budget. If you have the extra money to get the tankless unit that will be sufficient to fill your home with hot water on demand, then it might be worth it short and long term. However, if you can't afford the high cost of installation, the proper sized tank water heater will serve its purpose and your home well over the following 10 to 15 years. Either way, you'll have hot water when you need it, and that's what matters.

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