Many consumers are looking to become more environmentally-friendly when purchasing appliances, while also saving money. By purchasing the proper appliances, you not only save money on your utility bills, you also save money on the actual appliances themselves. In addition, there may be rebates available from the utility company when you purchase certain types of appliances. If you are in the market for a new hot water heater, you are probably faced with an overwhelming number of choices. Before you can narrow down the choices and choose just one, you first have to determine whether you want a standard water heater with a storage tank, or a tankless, on-demand water heater. We’ve put together a brief primer to help you choose.

Standard Water Heaters

Most water heaters use a tank to hold heated water. These water heaters can be powered by gas or electricity. The tanks themselves vary in size, from around 20 gallons to 120 gallons. These tanks are insulated and hold heated water until you are ready to use it. The water heater then replenishes the water you’ve used with cold water that it has to heat to the proper temperature. While these types of water heaters are great for keeping hot water on hand when you need it, they aren’t the most energy efficient. New water heaters have come a long way in the efficiency department, but they aren’t perfect. Though they are insulated, they do lose heat through the exterior walls. They also take a lot of energy to keep the water constantly heated and ready for use. And there’s always the chance that you can run out of hot water, when the demand for fresh, hot water is greater than your hot water heater’s ability to keep up with your needs.

Tankless Water Heaters

Tankless water heaters are also powered by either gas or electricity. While they can be installed at the point of use, such as in the bathroom or kitchen, most are installed in a central location in your home. These water heaters heat water only as needed when you turn on the tap. There is no storage tank and no energy lost keeping water constantly hot in case someone needs it. As a result, these types of water heaters can be up to 25% more energy efficient than their standard counterparts. In addition, tankless hot water heaters make sure that hot water is always available when you want it. You never have to wait for the tank to heat more water after you’ve depleted it.

So, which is best? If you are focused on cost, the tankless water heater is substantially more expensive at the time of purchase than its standard counterpart. However, industry experts estimate that the cost to run a standard hot water heater is almost twice that of a tankless water heater. This is a huge difference, and for a typical single-family dwelling, this could mean a couple hundred dollars a year saved by switching to a tankless model. Tankless water heaters also last years longer than standard hot water heaters, saving you money on replacement costs. There are also less parts to need repaired or replaced over the life of the unit. Ultimately, the decision is up to the buyer, but the tankless water heater stands head and shoulders above the competition.