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Ultimate Tankless Water Heater Buying Guide

In this tankless water heater buying guide, we’ll have a look on how tankless water heater systems are different with conventional storage tank water heaters and why they operate more efficient. We will also look at key factors you should take to account when planning to buy a new tankless water heater.

Tankless water heaters, also known as instantaneous or on-demand water heaters, are gaining popularity globally including Canada due to higher efficiency than traditional storage tank heaters. On the other hand, storage systems may not be able to meet high water demands, but tankless systems can provide an almost unlimited supply.

Natural Resources Canada states Canadians consume an average of 75 liters / 20 US gallons of hot water at home daily, for activities like washing dishes and clothes, cleaning and showering. Water heaters use 17.2% of energy in the average Canadian house.

How Does a Tankless Water Heater Work?

Before we look at how a tankless (on demand) water heater works, let’s check how conventional storage tank water heaters heating and supplying hot water.

How Does a Storage Tank Water Heater Work?

Conventional Storage Tank Water Heater
Conventional Storage Tank Water Heater

A traditional tank water heater is a system that uses a large tank (113 – 200 liters/30 – 50 Gallon) to store and heat a reserve of cold water. The tank is heated using a gas burner or electric heating element. The heated water is maintained at a certain temperature until it is needed. When a hot water tap is opened, hot water is drawn from the tank and cold water is replaced, which is then heated to the desired temperature.

This type of water heater requires a considerable amount of energy to heat the water and can be costly to operate. Additionally, you are limited to the amount of hot water that can be supplied, as the tank can only hold a finite amount of water.

Maintaining hot water in the tank constantly, results in standby heat loss. This is energy going to waste when the water heater is not in use. As the tank water heater ages, the standby losses can increase more and result in more energy expenses.

How Does a Tankless Water Heater Work?

Tankless Water Heater
Tankless Water Heater

Tankless heaters, also called on-demand hot water heaters, are a modern and high efficiency alternative to the traditional storage tank water heater.

Instead of storing hot water in a tank like a traditional water heater, a tankless water heater instantly heats the water when there is a demand for hot water. This is achieved by passing the water through a series of pipes and heating coils within the unit (heat exchanger), which is heated by either gas or electricity (in electric tankless water heaters) which eliminates the need for a tank and standby loss, making them more efficient than traditional water heaters.

Additionally, these energy efficient water heaters are more compact, requiring less space than traditional water heaters. They also last longer (20 years when installed and maintained properly), as they have no tank that is prone to corrosion.

Is a Tankless Water Heater Better?

We saw that tankless systems are more efficient than storage tank water heaters. Yet, tankless may not be the ideal choice for all. Depending on the hot water usage of a household, storage tank models may be more cost-effective. Let’s compare tankless water heaters with traditional tank waters and the pros and cons.
Tankless VS Tank Water Heaters

Tankless Pros

Tankless Saves You Money – As we discussed, tankless water heaters are more efficient than conventional storage tank water heaters because they heat water only when needed. An ENERGY STAR rated tankless water heater uses 30% less energy and helps you to lower your energy bills also reduces your carbon footprint.

Space Saving – Tankless water heaters are much more compact than those bulky storage tank water heaters, taking up considerably less space in your mechanical room. This can help you save precious square footage and open up more space for other equipment.

Convenience – When you empty a tank water heater storage, you need to wait for the water heater to heat up the whole tank to your desired temperature. Properly sized and installed, a tankless water heater can almost immediately supply an abundance of hot water, enabling effortless performance of any hot-water-requiring task.

Most tankless water heaters, whether gas-burning or electric, have a control panel on the front to set temperature, conserving energy and lowering bills.

Certain Tankless systems also can be equipped with Wi-Fi, providing the ability to manage your water heater from any internet-connected device using mobile apps.

Longevity – Tankless water heaters have longer life expectancies than storage tank heaters; correctly maintained tank heaters last 10-15 years, while tankless can last 20+ years.

Energy Efficiency Rebate – Upgrading to an ENERGY STAR® tankless water heater may qualify you for rebates from local utilities, the federal government, or your province.

Tankless Cons

Purchase and Installation Cost – A tankless water heater costs more than conventional tank water heaters. Tank water heaters tend to cost less up front, with an average cost of $500 to $1,000 and are generally simpler and cost less to install. On the other hand, the average cost of a quality gas-fired tankless water heater price is ranging from $2,000 to $3,000 for the unit itself and because they require a more complicated installation process, the installation cost can add to the initial cost.

Factors to Consider When Buying a Tankless Water Heater

If you want to switch to a tankless water heater, consider these important factors before investing.

Fuel Options

The three most common tankless water heaters are electricity, natural gas, and propane. Each of these fuel sources has its own unique advantages and disadvantages that should be taken into consideration when selecting a tankless water heater.

Available Fuel – The first and most important factor to consider when you choosing a tankless water heater is the availability of a convenient source of natural gas, or propane. Most of us in Toronto and GTA, have access to both natural gas and electricity.

Fuel Cost – Electric tankless models are cheaper and more efficient than gas-burning models but higher efficiency doesn’t always mean lower energy bills. Because electricity tends to be more expensive than natural gas, electric tankless models have a higher running cost.

Proper Sizing

It is important to size the heater correctly so that it can meet the demands of the fixtures while providing adequate hot water. When sizing a tankless water heater, there are two important factors that need to be taken into account; the Flow Rate and the Temperature Rise.

Flow Rate – Is the amount of water in gallons that will be drawn from the heater (in peak demand for hot water) in a given time and measured in gallons per minute or GPM. This can be determined by adding the flow rate of all appliances and fixtures that will be using the heater at the same time.

Temperature Rise – Is the difference between the temperature of the water entering the heater (also called ground water temperature) which is typically determined by the climate of the area and the temperature of the water leaving the heater (also known as ΔT). This will depend on the temperature of the incoming water, as well as the desired output temperature.

If you’re living in Toronto where groundwater temperatures in winter can drop to 5.5°C / 42° F and your desired outlet temperature is 49°C / 120° F, the required temperature rise will be 25°C / 78° F.

Now that we know the peak demand flow rate and temperature rise, the next step is to choose a tankless water heater that satisfies these specifications. All manufacturers, in general, include sizing charts with their tankless water heater products that state maximum flow rates for a certain temperature rise. You want to select a unit that meets or surpasses your peak hot water demand.

Energy Efficiency

The recently developed and more accurate metric to determine the efficiency of a water heater, is called UEF (Uniform Energy Factor). It is based on energy consumption versus hot water generated, as well as other important calculations. The higher the UEF rating of the water heater, the better the efficiency.

Water heaters with a UEF greater than 0.9 are considered ultra-efficient and are referred to as condensing (more on condensing water heaters later in this page).

ENERGY STAR® Certification

Looking for ENERGY STAR certification is one of the simplest methods to ensure you’re obtaining a high-efficiency and high-performance tankless water heater. This indicates that the model has been thoroughly tested and is guaranteed to fulfill high-efficiency criteria.

Energy Star Certified water heaters will help you reduce energy consumption and save on energy bills.

Condensing Technology

A condensing gas tankless water heater works by utilizing a secondary heat exchanger to capture the heat from water vapor created by combustion process of burning gas and transfer this hit to the incoming water supply.

This process preheats the incoming water before it passes through the primary heat exchanger, resulting in an increased flow rate and improved energy efficiency of the water heater. This type of heater is becoming increasingly popular due to its efficient design and the cost savings it provides over non-condensing tankless water heaters.

Proper Installation

Correct sizing and installation of tankless water heaters is vital, as they are expensive and may require more work to install compared to traditional water heaters. Appropriate installation guarantees optimal results and optimal efficiency, giving you the most value for your money.

Professional installation is critical to maintain your warranty as manufacturers usually require an expert, factory-trained HVAC technician to do the job, or else you forfeit your warranty.


When shopping for a tankless water heater, it is important to look for common warranty terms such as the length of coverage, what parts of the heater are covered, and whether there is a labor warranty included. Additionally, you should check to see if any conditions or restrictions that may apply to the warranty.

All our installations are covered by our 2 year free and reasonable labor warranty

Best Tankless Water Heaters in Canada

There are several brands of tankless water heaters that you can trust in their quality, performance and aftermarket services provided by their manufacturers.

Based on our years of experience dealing with a number of manufacturers, our trusted brands that we suggest to our clients are Navien, Rinnai, Noritz and Rheem.

We wish this article gave you the details for investing in a tankless or storage tank water heater. Reach out to us if you have doubts or queries; we’re pleased to provide free, no-obligation advice.

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