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Heat Pump Water Heater vs. Tankless Water Heater: What's The Difference, Pros, Cons, And More

Written by Carol J Alexander

Published on March 6, 2023


Heat Pump Water Heater vs. Tankless Water Heater: What's The Difference, Pros, Cons, And More

An overview of a heat pump water heater and tankless water heater, their differences, pros and cons, and costs. Which is right for you?

To provide you with the most accurate and up-to-date information, we consult a number of sources when producing each article, including licensed contractors and industry experts.

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How old is your water heater? According to the U.S. Energy Information Administration (EIA), 25 million homes have a water heater over 10 years old. Since the typical water heater lasts 10 to 15 years, waking up to a cold shower could be in your near future. Don’t wait for that to happen to start researching water heaters. Get ahead of the game, stay informed on new technology, and you'll know exactly what you want when you’re shivering your way to the plumbing supply.

This article compares the two newest innovations in the hot water scene: the heat pump water heater (also known as the hybrid water heater) and the tankless water heater. Keep reading to learn how each work, their pros and cons, and their relative costs.

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Heat pump water heater vs. tankless: how do they work?

Before choosing between a heat pump water heater (HPWH) and a tankless water heater, you need to know how each operates. A heat pump water heater includes a tank that holds hot water until you need it, much like a standard water heater. However, a tankless water heater works on demand, heating the water as it flows through the pipes. So, let’s look at each one more closely.

What is a heat pump water heater?

A heat pump water heater has a heat pump that sits on top of a water storage tank. A fan draws warm, ambient air into the unit and blows it across refrigerant-filled evaporator coils. Then, the refrigerant is pumped through a compressor that increases the temperature. It then passes through the coils inside the water tank, heating the water. Finally, the fan blows the cooled air out into the room.

Because a hybrid water heater depends on airflow, they require more space than a standard tank water heater for venting purposes. However, the process also dehumidifies and cools the area around it.

What is a tankless water heater?

Rather than storing a lot of hot water until it's needed, a tankless water heater acts on demand. When someone opens a hot water faucet, burners switch on. Then, as water passes the burners–whether electric or gas–it heats to the temperature the unit is set to.

For large households with multiple hot water demands at the same time, a tankless system may not keep the water temperature up. For these homeowners, several point-of-use heaters solve the problem. 

What are the pros and cons of heat pumps vs. tankless water heaters?

Before you can decide what type of water heater you want in your home, it helps to know the pros and cons of each.

Heat pump water heater pros and cons

While a heat pump water heater does use energy to keep the water in the tank hot, much like a standard water heater, it does have features that make it more energy efficient. So, let’s look at its pros and cons.

  • + Saves energy by using ambient air
  • + Has a fast return on investment
  • + Typically lasts 10-15 years
  • + Possible rebates and tax incentives for some models
  • + More efficient than a standard water heater
  • + Dehumidifies and cools the surrounding area
  • - Requires more space than any other water heater type
  • - Not suitable for cold climates
  • - Unit cost is high

Tankless water heater pros and cons

Tankless water heaters may use energy to keep water hot until use, but they do have a few cons you want to consider.

  • + The water heats quickly on demand
  • + Typically lasts 20 years
  • + Small units take up very little space
  • + Suitable for any climate
  • + Lower unit cost
  • - You may need more than one unit for a large home
  • - Installation costs could be higher

Which water heater is more expensive?

The initial cost to purchase and install a water heater isn’t the only consideration when asking which type is more expensive. You also want to account for the operating expenses. So let’s look at the cost from all sides for a good look at which option is the most affordable for your needs.

The unit

The typical cost of an electric tankless water heater that supplies an entire house is $450 to $1,500. For a gas unit, expect to pay from $500 to $2,000. An HPWH costs $1,200 to $2,500 for an electric water heater and $1,400 to $3,000 for gas. While these water heater options are considerably more expensive than the typical tank water heater, the operation cost makes up for it in the long run. And to save even more on your energy costs, always look for Energy Star-rated appliances.


Similar to the cost to install a standard tank water heater, the cost to install a hybrid water heater averages from $300 to $1,500. Of course, installing gas lines adds to the cost if you’re switching from electric. 

Tankless units, however, are complicated. If you previously didn’t have a tankless system, opening walls and cutting pipes make the installation more costly. In addition, running gas lines is an added expense if you choose gas units. Expect to pay from $500 to $1,700 per unit to install a tankless water heater.

Installing a water heater is not a DIY-friendly job. Find a plumber near you today


Once you get past the upfront costs, you begin to save some bucks. For example, standard tank water heaters fill with cold water and heat to about 120 degrees Fahrenheit. But, so you’re not waiting around for hot water each time you turn on the tap, the heater turns on and off as needed to keep the water hot, whether you need it or not. 

Imagine you finally get to take that two-week dream trip to Hawaii. No worries, your storage tank water heater keeps your water hot the whole time you’re gone. Wasting energy.

A hybrid water heater works similarly. But, whether it’s electric, gas, or geothermal, it uses warm ambient air to help heat the water, thereby using less energy. Compared to a conventional water heater, the energy savings with a hybrid can be hundreds of dollars a year.

The tankless water heater, however, uses electric, natural gas, or propane to heat water on demand. So, energy is only used once you turn on the tap. This design makes the tankless water heater the market's most economical and energy-efficient water heating system.

Is a heat pump water heater or tankless right for your home?

Trying to decide what type of water heater is the most cost-effective for your home? In addition to the factors in the table above, here are a few things to consider.

  • Both of these options are more economical than traditional water heaters.
  • The retrofit is more complicated and costly than a hybrid if you don't have an existing tankless system.
  • Even if you purchase more than one tankless unit, you could recover the investment in energy savings over the system's lifespan.

Which water heater is easier to maintain?

Periodic maintenance will extend the lifespan of any water heater and keep it running efficiently, lowering energy bills. Check the temperature and pressure valves on a tank water heater twice a year. Also, replace the anode rod once or twice yearly, depending on the hardness of your water. For a tankless water heater, use a commercial descaling solution or diluted white vinegar to descale once or twice a year, depending on the water conditions. And, since all water heaters are different, always follow the manufacturer’s instructions for all maintenance tasks.

Hire a professional plumber to install your preferred water heater

Most homeowners would agree that hot showers are a necessity of life. So choosing the right water heating system is an important decision. Whether you go with a tankless system or a hybrid heat pump model, you’ll want to partner with a plumbing professional with a proven track record in your region.

Find a local plumber to install your hot water system today

Written by

Carol J Alexander Content Specialist and Subject Matter Expert

Carol J Alexander is a home remodeling industry expert for Fixr.com. For more than 15 years as a journalist and content marketer, her in-depth research, interviewing skills, and technical insight have ensured she provides the most accurate and current information on a given topic. Before joining the Fixr team, her personal clients included leaders in the building materials market like Behr Paint Company, CertainTeed, and Chicago Faucet, and national publications like This Old House and Real Homes.