In short, the difference between tankless and tank water heaters is how they heat and deliver hot water. A tank water heater stores and continuously heats a fixed amount of water in a storage tank, keeping it ready for use at any time. A tankless water heater, on the other hand, heats water only when you need it, providing hot water on demand without storing it in a tank. Tank water heaters typically have lower installation costs but a limited hot water supply, while tankless systems offer endless hot water and higher energy efficiency, though they usually require a higher upfront investment.

Both options provide reliable hot water, but they operate very differently and offer distinct advantages depending on your household size, budget, and hot water usage.

This guide explains how each system works, their pros and cons, the best brands, and how they compare so you can determine which solution is right for your home.

What is a tankless water heater

A tankless water heater, also called an on-demand water heater, heats water only when it is needed. Unlike traditional systems that store hot water in a tank, tankless systems use high-powered heating elements or gas burners to instantly heat water as it flows through the unit.

When a hot water tap is opened, cold water enters the heater and passes through a heat exchanger. The system quickly raises the water temperature to the desired level and sends it directly to the faucet, shower, or appliance.

Because there is no storage tank, tankless systems provide a continuous supply of hot water as long as the unit’s flow capacity is not exceeded.

Tankless water heaters are available in two main types:

Gas tankless water heaters – typically powered by natural gas or propane and capable of higher output.
Electric tankless water heaters – compact and efficient but usually suited for smaller households or point-of-use applications.

Tankless systems are becoming increasingly popular due to their energy efficiency, compact design, and unlimited hot water capability.

Pros of Tankless Water Heaters

Endless Hot Water

One of the biggest advantages of tankless systems is that they never run out of hot water. Because the system heats water on demand, it can provide continuous hot water for long showers, laundry cycles, and dishwashing.

This makes tankless units ideal for large families, homes with multiple bathrooms, and households with high hot water usage. Because tankless systems heat water on demand and do not rely on a limited storage tank, they can continuously provide hot water even when several fixtures, such as showers, washing machines, and dishwashers, are used throughout the day. This makes them especially beneficial in busy households where hot water demand is high and running out of hot water would be inconvenient.

Energy Efficiency

Tankless water heaters only heat water when needed, eliminating standby heat loss that occurs in tank systems. This can reduce energy consumption and lower utility bills.

According to the U.S. Department of Energy, tankless water heaters can be 8–34% more energy efficient depending on water usage.

Space Saving Design

Tankless units are compact and wall-mounted, freeing up valuable floor space in utility rooms, garages, or basements.

Possible Longer Lifespan

Tankless systems typically last 15–20 years, while traditional tanks often last 10-15 years. While the difference in lifespan is not dramatic, tankless water heaters generally have the potential to last longer because many of their components can be repaired or replaced individually. This means homeowners may be able to extend the life of the system without replacing the entire unit, unlike traditional tank water heaters, which are often replaced as a whole when they fail.

Cons of Tankless Water Heaters

Higher Installation Cost

The biggest drawback of tankless systems is the higher upfront installation cost. Installing a tankless water heater often requires additional upgrades to support the system’s higher power and performance needs. These upgrades may include increasing the size of the gas line, installing new venting for exhaust, upgrading the electrical panel, or modifying existing plumbing connections. Because of these additional requirements, installing a tankless water heater can be significantly more expensive than replacing or installing a traditional tank water heater.

Limited Flow Rate

While tankless systems provide endless hot water, they have a maximum flow capacity. If several fixtures run simultaneously—such as showers, washing machines, and dishwashers—the unit may struggle to keep up.

Potential Delay in Hot Water

In some homes, users may notice a slight delay before hot water reaches the faucet because the system must activate when water flow begins.

Best Brands of Tankless Water Heaters

Several manufacturers produce high-quality tankless water heaters known for reliability and performance.

Navien

Navien is one of the most popular tankless water heater brands in North America. Their units are known for high energy efficiency, advanced condensing technology, built-in recirculation systems, and quiet operation. These features help improve performance while reducing energy consumption and wait times for hot water. Navien systems are commonly installed in residential homes and are widely considered a premium option for homeowners looking for reliable and efficient tankless water heating.

Rinnai

Rinnai is another industry leader specializing in gas tankless water heaters. Their units are valued for strong performance, advanced safety features, high flow rates, and long-term reliability. These qualities make Rinnai systems capable of delivering consistent hot water even in households with high demand. Because of their durability and performance, Rinnai heaters are widely used in both residential and commercial settings.

What is a Tank Water Heater

A tank water heater, also called a storage water heater, is the traditional system used in most homes.

This system stores heated water in an insulated tank, keeping it hot and ready for use throughout the day. When hot water is used, the tank refills with cold water and reheats it to maintain the desired temperature.

Tank water heaters are typically measured in gallons, which indicates how much hot water the tank can store.

Common Tank Sizes

The most common tank sizes include:

30–40 gallons – suitable for small households (1–2 people)
40–50 gallons – ideal for average households (3–4 people)
50–75 gallons – best for large families (5+ people)

Tank water heaters are available in both gas and electric models.

Pros of Tank Water Heaters

Lower Installation Cost

Tank water heaters are generally less expensive to install because they:

Use standard plumbing connections
Require fewer system upgrades
Are easier for plumbers to replace

For homeowners on a budget, this makes tank water heaters a more affordable option.

Simple and Reliable Technology

Storage tank water heaters have been used for decades and are known for their simple and proven design. Replacement parts are widely available, and most plumbers are familiar with servicing them.

Lower Initial Purchase Price

The equipment itself is typically cheaper than tankless units, making it easier for homeowners to replace a failing water heater quickly.

Cons of Tank Water Heaters

Limited Hot Water Supply

The biggest limitation of tank water heaters is that they can run out of hot water. Once the tank is emptied, the system must reheat a new tank of water, which can take anywhere from 20 minutes to over an hour.

Energy Loss from Stored Water

Tank systems continuously heat water in the tank—even when hot water is not being used. This creates standby energy loss, which can increase utility costs.

Larger Space Requirements

Tank water heaters require more space and are usually installed in:

Basements
Utility closets
Garages

Best Brands of Tank Water Heaters

Bradford White

Bradford White is known for manufacturing high-quality water heaters designed for professional installation. Their systems are recognized for durability and strong warranties.

Rheem

Rheem produces a wide range of residential water heaters and is one of the most widely available brands in the U.S. Their products offer reliable performance and competitive pricing.

A.O. Smith

A.O. Smith is a long-established manufacturer known for innovation and energy-efficient water heating technology. Their models are widely used in homes and commercial buildings.