How To Decide Whether to Buy a New Water Heater or Stick with Your Old One

Bottom Line: Save Money

The information in this article only applies to tank-type water heaters (gas or electric). It does not include information on solar water heaters or tankless water heaters.

  1. Spruce up the old or buy a new? There are several easy ways to help your old water heater conserve energy and lower your bill as well as extending the life of your old heater. You can install low-flow showerheads, heat traps, insulation, vent dampers and use a water heater blanket (see How To Shrink Power Bills by Conserving Energy with your Water Heater). Ask a local plumbing service technician if installing any of these devices is practical for your situation. Also, you can adjust your thermostat to a lower temperature, which is the easiest—and least expensive—way to save energy. Obviously, maintaining your old water heater saves you the cost of buying a new one. If you can double or even triple the life of your heater, you will save a significant amount of money.
  2. The ideal scenario would be to implement energy—and money—saving activities with your current water heater. Then over time, using the money you have saved, upgrade to a new system such as a tankless or solar water heating system. A tankless system could save you even more on your electric or gas bill. Also, the more expensive exceptionally efficient solar water heating system could eliminate the cost of the electric or gas heater on your bill entirely, plus you could receive a sizeable tax credit on your income tax for the year. As stated, this would the ideal. However, sometimes repairing the old will cost more than buying a new gas or electric tank. So when should you spruce up the old tank and when should give in and buy a new one?
  3. The cost analysis formula. In order to figure out the cost of a new water heater as compared to keeping the old one, you will need to run the cost cycle analysis. A cost cycle consists of operating costs, fuel costs, lifetime potential, inflationary costs and purchase price. You will need to do a bit of research here, not to mention a little bit of math.

    Here is a list of the figures you will need:

    • Purchase price of the new water heater you're interested in.
    • Cost of energy (this is your utility bill).
    • The yearly energy cost to use the appliance. This can be found on the EnergyGuide label. This label will be on the water heater itself; it should be in plain view. However, occasionally the water heater may have been installed with the EnergyGuide label facing the wall.
    • The estimated life of the appliance. For electric and gas water heaters, the average lifetime is 13 years.
    • A discount factor to adjust for inflation. This discount factor is 0.83 for both electric and gas water heaters.

    Now to plug in all the numbers. Here is the formula:

    • Purchase Price + Yearly Energy Cost + Estimated Lifetime (13 years) x Discount Factor (0.83) = COST CYCLE*
  4. How to use the cost cycle number. Finally, use the cost cycle number you just calculated, and compare it with the price tag of a new water heater. If the cost cycle is higher than the price of a new water heater, then you're better off trading in the old one for a new, more cost-effective water heater. Make sure that you use the formula on both water heaters to make the comparison.

* This information is provided by the ACEEE (American Council for an Energy Efficient Economy)


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Excellent information. Appreciate the article.


By Ron Ambler