The Ultimate Gas and Electric Water Heater Buyer's Guide

Between cost, energy, and size, there are lots of factors that go into choosing the right hot water heater for your home. Luckily, we spent hundreds of hours researching the best hot water heaters. This is a guide we put together to make the process of buying a conventional gas or electric water heater a little easier.

Looking for the best model to buy? Check out our electric water heater reviews.

gas and electric water heater buyers guide

Table of contents

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What are the pros and cons of buying conventional tank water heaters? 

The most popular type of hot water heater in America is the conventional storage tank option. They are the cheapest to install, but the least energy efficient. So while you will save money upfront, you will pay for it over the long run.

So why are conventional electric and gas tanks inefficient? 

The main reason is their design. Conventional tanks constantly burn energy — either electricity, natural gas, propane, or fuel oil — to heat up water inside a tank. But unlike tankless models they keep your water warm at all hours of the day. 

So whether you’re asleep at 3am or on vacation, these water heaters are at work. 

But they were the first type of water heater used in America and have remained the most popular since their introduction. Manufacturers make a lot of them and plumbers install a lot of them. Hence why they’re the cheapest to install.

Here are all the pros and cons:


  • Upfront cost — Because these models have been the most commonly installed hot water heaters in America, the cost of both the unit and installation is the cheapest.
  • Storage capacity — Storage tanks keep anywhere from 30 to 80 gallons hot at all times. That means that if your family of four gets home from soccer and everyone wants to shower at once, you’ll be able to do it.


  • Operating cost — Storage tanks are the most expensive type of hot water heater to operate each year. While models are getting more efficient with each year, they are still 2-4 times more expensive than tankless or heat pump water heaters. Ultimately that means a higher utility bill each month.
  • Safety risks — Storage tanks often run on natural gas and that can be dangerous. Every year there are horror stories of families that die because their hot water heater leaked gas.

Upfront cost of conventional hot water heaters

Conventional tank water heaters cost anywhere from $340 – $1,500. You will probably hear terms like the “installed cost of a hot water heater.” That’s another way of saying the total cost including the heater unit, labor and supplies. Below we’ll break down the upfront costs in more detail.

  • Unit cost — The cheapest (and often very inefficient) hot water heaters cost about $340. The most expensive models cost about $800.
  • Hot water heater installation — The cost of the labor depends on how long it takes a plumber to install the unit and how much they charge (which depends on living costs in your city). If you’re replacing an old unit and not switching fuel sources, the installation shouldn’t cost much. According to HomeWyse, this should take about 5 hours and cost about $400-500.
  • Supplies and parts — Your plumber may need to use connectors, fittings, mounting hardware, and other parts during the install. According to Homewyse, this should cost about $100.
  • Disposal — Some plumbers charge anywhere from $25 to $500 to remove your old hot water heater and throw it away. (This large range is why it’s important to get multiple bids and quotes).
If you want an exact estimate of how much a new water heater will cost, click the button below to receive a free quote from a plumber.

Annual operating cost of conventional hot water heater

The next thing you’ll want to consider is how much it costs to run your hot water heater each month or year. In other words, how much will your utility bill cost each month?

The simplest way to figure this out is to look for the bright yellow Energy Guide label, which will tell you how much you can expect to pay each year to operate your unit. But this is an average and there are a number of factors that influence your operating cost.

  • Energy factor — This is a measure of how energy efficient your hot water heater is. Energy factors on conventional tanks range from about .56 to .95. The higher the number, the more efficient the unit and the less money you’ll pay to operate it.
  • Energy consumption / usage — If you combine the energy factor with the amount of time that your hot water heater is used, you’ll get the total energy consumption. For electric heaters, this is measured in kilowatt hours per year (kWh/yr). For gas water heaters this is measured in therms or British Thermal Units (BTUs) per year.
    Cost of energy — Once you know the expected energy consumption per year you can multiply that by the cost of energy and get the expected operating cost each year. Electricity costs are measured in cents per kilowatt hour (kWh). Natural gas costs are measured in therms, British thermal units (BTUs), and cubic feet (Ccf). If you need to convert them, you can use this calculator on the EIAs website.

According to a study by NREL in 2016, the average operating costs for gas conventional tanks range from $300-400 per year. The same study estimated electric conventional tanks to cost about $350-400 per year.

How to find the right size hot water heater

To size a storage tank or heat pump you’ll want to choose the “first hour rating” that best suits your needs. The first hour rating is essentially the capacity of the storage tank.

To figure out how big a tank you need, you’ll need to estimate the maximum amount of water you’ll use in any given hour.

If you want to make the most accurate estimate you’ll need to multiply the time of each hot water use (e.g. showers) times the flow rate of that use.

So for example, the average shower uses 2 gallons per minute. If two people live in your home and take 10 minute showers back to back, then that’ll require 40 gallons of hot water.

But let’s say one of you needs to shave after your shower. The average flow rate of a sink is 0.5 gallons per minute. If it takes 2 minutes that’s another 1 gallon of capacity you’ll need.

If you want to learn more about sizing a storage tank hot water heater, visit this guide by The Department of Energy.

Keep reading

We spent hundreds of hours researching and reviewing the best water heaters in every category. Click one of the links below to check them out.

Conventional water heaters

Heat pump water heaters

Tankless water heaters

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