Will A Tankless Water Heater Really Save Me Money?

I saw an ad after the Super Bowl (which is about 2.1 million less to run I’d guess than the DURING game ad) about these tankless water heaters. I thought it sounded like a good idea because by the time the wife and kids hit the shower in the morning, there’s nothing left for ol’ Dad. Anyone else experience this?

So I got to thinking this might be a good idea. Always hot water, no need to continuously heat the water, and it is there when you need it. So I began to dig…

…what is a tankless water heater?

TanklessWaterHeater.com says:

Tankless Water Heaters, also called Instantaneous or Demand Water Heaters, provide hot water only as it is needed. Traditional storage water heaters produce standby energy losses that cost you money. We do not leave our homes heated while vacationing. We only heat our homes when there is a demand for heat. In the same way, a Tankless Water Heater is used only when there is a demand for hot water.”

I like the idea, and I always like idea of saving money so I’m clearly interested. I bought my house though with the water heater already installed, so I’ve never actually bought one. So I figured that would be a logical second step. I thought this thing may save me money in the long run, but how about in the short run?

How much do they cost?
I checked Froogle.com as that is where I venture a lot to find product pricing, to no avail. So I went right to the source, Lowes.com to find out, and sure enough they had some prices. For the full-sized normal heaters I found the price was very similar to the tankless heaters. I can work with that, but then the question comes up as to the loss I’d take switching over.

Can I sell my old water heater to recoup some of the costs?

Well, Ebay says I can, but for about 10% of what I must have paid for it when I moved in to my house. And clearly there aren’t a lot of hits there for it. The rest of the internet didn’t turn anything up either. I assume the guy that would swap mine out would have an interest in it, but again, would likely lowball me knowing that I wouldn’t do anything with it.

How much could I save per year switching then?
Well, I was reading this site and they say:

If I were to switch to a tankless heater today, I might save $7.00 per month on the efficiency differential and maybe an additional $2.00 per month on the amount of energy lost while the heated water sits in the tank. This means a tankless water heater could save me $108.00 per year. Let’s go ahead and be even more aggressive and say $125.00 per year.

So I like money savings per year, but what it comes down to is…

…is it worth it?
Eh, right now I’m guess not really. My monthly heating bill through the year falls at about $100/month. That’s not bad, not great, but not bad. And if I’m only going to be getting 10% of what I paid for it to POSSIBLY sell it, that gives me maybe $50 in my pocket the first year, and $125 per year after that. Tack on the labor it’d take someone to come in and install it and I’m thinking that would cost $100-$250.

The cheapest one I could see at Lowe’s was about $500. So that’d mean, putting all the $ together:

1. Start out paying $500 to purchase it.
2. Pay $250 to have it installed and the other taken away ($750 in the hole).
3. Get $50 for the old water heater ($700 in the hole).
4. Save $10 per month on my utilities. ($690 after first month)
5. Use it until the remaining $690 is gone will take me 69 months, or a little over 5 years. ($0 in the hole)
6. Break even in 2013ish.

So it would make up its value in about 5 years. Am I going to still live in this house in 5 years? Not sure, so…

…in conclusion
I like the idea of saving the earth and energy, I’m always big on that, but when it comes down to swapping it out now, the price tag doesn’t quite fit for me yet. If I were building a new house, I’d certainly go with one for the energy and “green-ness” part of it, but when you get down to deciding to swap out, I vote keep your current one if you’re interested in money savings. You can do a lot with the $750 you’re saving over 5 years that is doing better in a high interest savings or MMA account.

Filed Under: adviceCompensationDebtEmergency fundfinancial educationFrugalHouse

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  • Tankless water heater are a great source of fast heat. Not every jurisdiction allows them, so check your city ordinances to make sure it’s ok. In my experience they’ve been much more reliable than a usual tank water heater and over time the tankless variety will save you money.

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  • Guest

    Your installation estimate of $250 is extremely low. It is highly unlikely that you will be able to get one installed for less than $1000, and that would be a basic outdoor mount option. If you are looking to get it mounted inside with proper venting through the roof etc, you’re looking at more like $1500-2k.