Buying a water heater costs $150-$3,500, depending on capacity, energy efficiency and type. Traditional tank systems run about $100-$600 for electric and $250-$1,000 for gas. Tankless types cost $200-$1,200, from a small under-sink unit to one that delivers 5 gallons a minute. Heat pump models are$600-$2,000 or more, and solar water heaters run $1,000-$5,000 (including installation). Weigh the purchase price against the ongoing monthly expenses; the cheapest units are going to be the most expensive ones to use. The U.S. Department of Energy gives detailed descriptions of each type.
Installation runs about $200-$400 for a traditional tank model depending on size, existing set-up, fit and other factors; installing a tankless water heater can cost two to four times more if the supply lines or venting need resizing or other significant changes are required; heat pump water heaters cost about $300-$700 to install; and solar systems usually have installation included in the purchase price. It costs more to replace an old-style heater with a different system, but can save money in the long run.
What should be included:
Traditionally, two people need a 30-40 gallon capacity tank; five or more in a household calls for 50-80 gallons. But the first-hour rating (how many gallons it delivers in an hour of use) can be more important than capacity; if you buy a tank that puts out more than you need hourly, you're wasting money heating extra water. The on-demand tankless systems avoid that cost and take up less space, but you might need more than one to shower and run a dishwasher at the same time. A heat pump system requires a lot of open space around it in a room that stays warm.
Replacing an old water heater with a similar but updated model is relatively straightforward, but be sure to check the dimensions. New more-energy efficient units are often a bit larger, and might not fit the existing space. And be sure you're clear on the space and hook-ups available in your home, as compared to the requirements of a more energy-efficient style of water heater.