In this report
Overview
How to choose
What you'll pay
How they work
October 2008
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How to choose
Tankless models probably aren't for you if higher up-front costs and long payback are a concern. But they do use less energy and might make sense for long but infrequent use, such as back-to-back showers. Keep these points in mind:

Factor in location
Unlike a regular water heater, a tankless model's water output is immediately affected by groundwater temperatures. The same model that produces 7.2 gallons per minute (GPM) when installed in a warm Florida garage will output only 4.2 GPM in a cold New England basement because the colder water requires the temperature to be raised 77 degrees rather than 44. Use your coldest groundwater temperature to calculate the gallons per minute you'll need.

Know your flow
Undersizing a tank­less water heater is a common mistake.

Get the details right
Look for an oxygen-depletion sensor that shuts off the water heater if carbon monoxide is detected and a film wrap around the heat exchanger that will shut off the device if it gets too hot. Since tankless models are still relatively uncommon, consider using manufacturer-trained installers. Some companies extend the warranty if you do.

Look for rebates or incentives
Many tankless models qualify for utility rebates and state tax credits. Check the Database of State Incentives for Renewables & Efficiency at www.dsireusa.org.

Posted: September 2008 — Consumer Reports Magazine issue: October 2008