Water heaters are one of the most basic needs of every household. Only the absence of a few things in our lives highlights their true importance. Similarly, only a cold shower can emphasize the importance of a quality water heater. For houses built in colder climates, a quality water heater giving you uninterrupted access to hot water is no less than a blessing.

But when going to purchase it for the first time, most of us can be often confused as there are many types of water heaters and what the exact demands of our homes are. We don’t even fully realize the parameters we ought to be looking at while buying one of these machines. That is why we have compiled all the main points on one platform in this water heater buying guide for you to be absolutely educated when going to make a purchase.

Types of Water Heaters:

There are different types of water heaters but perhaps the broadest and necessary classification is the tank storage and tankless type of water heaters. It is crucial to know the distinctions between each type so that you can formulate a knowledgeable opinion about which kind of water heater to buy.

  • Conventional Storage Tank Water Heaters
  • Tankless (On-Demand) Water Heaters
  • Heat Pump or Hybrid Water Heaters
  • Solar Powered Water Heaters
  • Condensing Water Heaters

Conventional Storage Tank Water Heaters:

Conventional Storage Tank Water Heaters

The storage tank water heaters are the oldest and most common type of water heater available in the market. They work by heating the water and then storing it in an insulated tank for future use. It functions in such a way that when you open the tap, the hot water gets released from the top and the cool water takes its place from beneath. The tank employed usually has a capacity ranging from 20 Gallons to about 100 Gallons. They also have temperature and pressure valves for whenever those variables surpass a certain value.

The storage tank-type water heaters may be powered by different power sources like heating an electrical resistance element or more commonly burning LPG or natural gas. There are also solar-powered and hybrid models but more on them later.

  • Can store hot water for long periods of time even when electric or gas supply is interrupted.
  • They have a lower initial expenditure compared to tankless water heaters.

  • Their installation and maintenance are comparatively easy and require less expertise. This saves you money on repairs as time goes on.

  • Better for bigger families and commercial usage due to storage capabilities.

  • They are not as energy efficient as tankless water heaters. This is because of standby heat loss that is unavoidable in this type of water heater as the water is stored whenever you are not using it.
  • Ultimately, they cost you more in utility bills as time goes on compared to tankless water heaters.

  • They can take up a greater space in your homes and for people that live in apartments or homes where space may be an issue, they may not be suitable.

  • Do not last as long as some of the best tankless water heaters.

Tankless (On-Demand) Water Heaters:

Tankless water heaters

Tankless Water Heaters directly provide you with hot water instead of storing it. They have a heating element powered mostly by electricity or gas that only gets activated when you need it (self-modulating technology).

Consequently, they are much more energy-conserving than tank storage models, saving 20-30% of energy compared to tank storage models if you use less than 40 gallons of water. They are limited by the Gallons Per Minute (GPM) amount which is the peak flow that they can provide which may vary from 2.1-5.5 GPM.

Generally, they are best for smaller homes or apartments and can even be used as RV tankless water heaters,  where you do not have enough space as they often are of the same size as a laptop. They are also suitable for this need as they can only power a limited number of showers and sinks, especially when used in colder climates.

  • Due to their smaller size, Tankless water heaters tend to take up much less space in comparison to the storage tank models. They can be installed in small nooks often under the sink or near your shower.
  • The average shelf life of tankless water heaters is almost double that of tank storage models with some of the best models lasting about two decades.

  • Over time, it can conserve 20-30% energy compared to tank storage water heaters and can save up on utility bills as time goes on. This is due to the self-modulating technology found in all the latest tankless models.

  • Take less time to heat the water and can give you hot water on demand, unlike tank water heaters that can often take time in filling up and heating the water.

  • There is a greater upfront investment compared to tank water heaters that cost much less, to begin with.
  • The installation and maintenance charges of tankless water heaters are considerable and often you may have to rewire your electric or gas supply to provide for these models.

  • They have a set GPM value and more often than not find it difficult to provide you with the necessary hot water for showers and dishwashing simultaneously. Many of these tankless water heaters may need to be supplemented with another tankless unit for on-spot usage near your water source.

Heat Pump or Hybrid Water Heaters:

Hybrid Water Heaters

A relatively modern technology, heat pump water heaters use ambient heat and transfer it to the cool water instead of producing that heat directly. They operate in a mechanism opposite to that of a refrigerator taking heat from outside and transferring it inside the water heater. The refrigerator, of course, takes heat from inside expelling it through the radiator.

They use around 50% less energy in comparison to conventional electric water heaters. They are definitely expensive in comparison to conventional electric heaters but they can recover your investment in a shorter interval of time. Another drawback of this type of water heater is that they are not suitable in extremely cold surroundings and only work in areas with temperatures of about 40-90 degrees Fahrenheit throughout the year. They also require a considerable amount of area as they can go as high as 7-8 feet which is even taller than a conventional tank storage water heater.

  • They make complete use of air that has already been warmed so they are extremely energy efficient and can easily save you $200 every year.
  • Can only work in areas with temperatures ranging from 40-90 degrees Fahrenheit.
  • Need much more space than conventional tank storage models due to unique design.

Solar Powered Water Heaters:

Solar Water Heaters

Solar-powered water heaters employ solar energy through solar collectors to heat up the water in storage tanks. The heat collected from solar cells on the roof is transferred usually via an antifreeze liquid to the stored water in a loop type system. These solar-powered water heaters deliver exceptional performance in sunny areas while their performance is not as great in cold climates.

Solar-powered water heaters are definitely an expensive modality to install but are great for the environment and can slowly but steadily recover your investment. They are a good option for warmer regions as they can make great use of sunlight while providing you with a consistent supply of hot water for several years.

  • There are several tax subsidies to promote solar power and the sun itself is a free resource for everyone.
  • It is a sustainable source of energy that is extremely environmentally friendly and does not burn fossil fuels.

  • The high upfront cost of a solar panel means that it will take you several years (as much as 10-15 years) to recover your investment.

Condensing Water Heaters:

Condensing Water Heaters

Condensing water heaters are designed to maximize the output of the traditional storage tank water heaters. They have the same storage tank as your conventional tank water heaters but the heating system has a dual condensing heat exchanger that delivers greater heat to the water while being much more energy-efficient. It basically captures and uses the flue gases that would otherwise go straight out.

It has pipes made of PVC and is ideal for units that have a capacity of more than 55 Gallons. This also helps in making the thermal efficiency of this type of water heater more than 95%. They cost about twice as much as the conventional storage tank water heater but can last more than a decade and can easily recover the initial investment.

  • Energy-efficient in comparison to storage tank water heaters with a thermal efficiency of over 95%.
  • Higher initial cost than standard tank storage models.
  • Not as effective for models with a capacity of fewer than 50 Gallons.

Water Heater Buying Guide

Now that you are aware of all the types of water heaters let discuss some important things to consider when you are planning to buy a new water heater according to your daily hot water needs.

  • Capacity
  • Size of Water Heater
  • Fuel Source
  • Energy Consumption
  • Inlet Temperature
  • Heating Time
  • Space
  • Maintenance
  • Budget


The capacity of a water heater denotes the amount of hot water it can provide in a given time. Generally, storage tank water heaters have a much higher capacity due to their ability to store water in the insulated tank. Tankless Water Heaters have a limited capacity to provide you with hot water that can be seriously affected when used by multiple people in colder climates. There are two parameters used to judge the capacity of the storage tank and tankless water heaters that deserve to be elaborated a bit.

First Hour Rating

When it comes to conventional storage water heaters, the first-hour rating is a good way to gauge the capacity. It basically tells you the gallons of hot water that a storage water heater can deliver when properly filled. To know if this value is enough for you or not, you could always try to calculate the peak usage you have at any time of the day and get a storage water heater that can meet those needs.

The reason this metric is used instead of just the capacity and your total needs in the day is that you do not use the same amount of water throughout the day. Rather, there are a few hours where your water usage is at its peak. For instance, the total usage could be 120 Gallons but about 50 Gallons of those 120 may be used in one hour as everyone in the family gets ready in the morning. That is where the first-hour rating comes in handy and provides you a more realistic parameter to judge the capacity of your storage water heater.

Flow Rate or GPM

For tankless water heaters, the useful parameter of capacity is the flow rate or the gallons per minute value. As signified by the name, it tells you how many Gallons the water heater can deliver in a minute. The GPM value is usually a range that tends to decrease when the outside temperature is less since the water heater has to do more work and increases when the climate is warm.

These values are usually given on the water heater manual so that you can have realistic expectations of what to expect from the water heater. You can always calculate the amount of water you may be using at any given time and get a tankless water heater that can meet those needs. For example, a sink may use about 1 GPM while a standard shower may use about 2.5 GPM. More on that in the sizing factor.

Size of Water Heater:

The size of the water heater that you need is extremely important to know. Water heaters often have a lot of strange numbers that are tough to understand when trying to buy the correct size for your house. There are two aspects to be aware of here. One is how much usage you want out of your water heater and then matching that with the correct capacity. The other is the surrounding temperature because in warmer climates your water heater can provide better results to you.

When it comes to tankless water heaters, the metric to remember is GPM. You should add up all the appliances in your house that require hot water during peak usage and get a tankless water heater that can provide you that. This is done while keeping in mind the surrounding temperature because the GPM value varies as inlet temperature changes so that you can get more hot water in a warmer climate. What that means for you is that if you live in a warmer area you could save some money as your water heater could deliver more warm water using less fuel.

For tank storage models, you need to see the first hour rating and compare it with your peak usage. A handy little worksheet you could use for this can be found here.

It tells you that a model with a 50-60 gallons capacity is enough for two people while an 80 gallon capacity is enough for four people. If you can get a water heater with a capacity of 100 gallons or two water heaters with a capacity of 50 gallons each, that should be enough for six people.

Fuel Source:

The fuel source is a major factor to consider when buying a water heater. Although variations exist in both of these (like solar or geothermal water heaters), electric and gas water heaters are the major fuel sources that deserve a mention in this buyer’s guide.

The exact choice of what fuel to use depends on fuel availability as well as the yearly operating costs of each fuel type.


Electricity is a rapidly emerging fuel source and has several merits of its own in comparison to gas water heaters. The biggest advantage of electricity is that it is readily available in any corner of the country. Electric water heaters can be easily installed and use a normal household connection.

They are cheaper to buy upfront in comparison to gas water heaters but in the long run, cost slightly more due to the fact that electricity is more expensive than natural gas. That is of course if natural gas is available in your area. If it is not, you will be better off going with an electric water heater.

Electric water Heaters have a greater EF (Energy Factor) value as well which means that they make better use of the energy they get from the electricity.


Natural gas water heaters are much more common and definitely cheaper to operate in comparison to electric water heaters. That is because of the greater costs of electricity in almost all states. Gas water heaters tend to have a greater initial cost but as apparent from their lower operating costs, they can easily recover that investment in a shorter interval of time.

While gas water heaters are an affordable option, you would have to check for the necessary piping. If you want to buy a tankless gas water heater, you will have to keep in mind that they require different gas lines than your usual natural gas line. Moreover, some areas do not have natural gas availability so you may be forced to look another way.

An option comparable to natural gas is propane. The problem with propane is that it is not easy to convert from natural gas to propane and generally it is best suited for remote areas like on vacations where natural gas supply may be scarce.

Energy Consumption:

In the modern-day, it is necessary to be responsible for energy consumption as it can save you money as well as conserve the environment. One thing that you should keep a keen eye on is the energy guide label on the water heater. It basically shows you how useful that water heater is in conserving annual costs.

Another useful metric is the Energy Factor. The Energy Factor or EF tells you how well the unit converts its fuel to heat. The greater the EF value, the better is the efficiency of the water heater. Electric water heaters have EF ranging from 0.8-0.95 while gas water heaters have an EF value ranging from 0.5 to 0.7 EF.

Perhaps the most responsible energy source in terms of energy consumption is a solar panel, the drawback of that being the higher initial cost and the slow recovery that it provides.

Inlet Temperature:

Inlet temperature is basically determined by the climate that you live in. What the inlet temperature means for your water heater is that the capacity of the water heater would be reduced in case of a lower inlet temperature. This is especially true for tankless water heaters that have a finite capacity and when the inlet temperature is low it significantly lowers their capacity and deems them unable to run multiple showers.

Heating Time:

Undoubtedly the advantage of using tankless water heaters is that they take way less heating time than storage tank water heaters. Some of the best models take just a few seconds and deliver hot water instantaneously while tank storage models need some time as they fill the storage and then heat the water. All in all, tankless models triumph in this one.


Due to the big size of the tank storage water heaters, space can be a genuine issue with them. If you have a basement or a dedicated empty space, it may not be an issue but in apartments and small houses, it can be tough to fit in a 7-foot water heater. That is where a tankless water heater can come in handy as some of them are almost as small as a laptop.

An alternative to the tank storage models when you have limited space is the point-of-use mini-tank water heater that can easily fit in below the sink or near a shower and give you enough storage and functionality to power that part alone.


Water Heaters can easily be bought and neglected for several years until suddenly they stop working with no warnings. So it is important to take care of them from time to time and seek professional help every few years. Some of the things to keep in mind are

  • Check your temperature and pressure valves because they are essential to prevent heat and air buildup in your water heater. If they are occluded, your water heater could burst due to the pressure build-up.
  • Check for the integrity of the heating element. The biggest threat to the heating element is hard water. Hard water has a high amount of minerals in it that tend to deposit on the surface of the heating elements reducing its shelf life
  • In the case of a gas or propane water heater, you have to ensure adequate ventilation by making sure that the pipes of the water heater have clear access outside the house.


The budget invariably becomes a factor in any purchase. In the case of water heaters, certain things should be kept in mind when you feel tempted to buy a cheap water heater.

First of all, always look for a decent warranty because that would save up on maintenance costs. Look at the energy guide label of the water heater to know how much it will cost annually. Always size the water heater as per your requirements since an oversized water heater is wasted energy and an undersized unit will never be able to survive the peak hours. Of course have a look at customer testimonials as they can provide an honest opinion on the product. Finally, it is always a good idea to buy from reputed companies since they tend to have better customer service and they adhere to their warranties providing top draw maintenance and repairs.


So this was an extremely comprehensive water heater buying guide. We tried to tell you everything you need to know about water heaters while trying to be as simplistic as possible.

As you might have noticed until now, there is no clear winner in terms of the best water heater and every kind is favorable for one demographic while unsuitable for another. That is why our advice would be to keep all the factors mentioned here in mind when making your purchase and deciding on your individual needs.