range of tankless water heaters

Water Heater Replacement Cost

Table of Contents

The cost to replace a water heater depends on many factors. These include the type of water heater, its size and capacity, and the complexity of the installation. Other points to consider are the cost of fuel and monthly running costs. In this guide, we talk about the different types of A.O. Smith water heaters, water heater costs and factors that influence the total cost of hot water heater replacement.

Water Heater Type

New water heater costs depend on the type of heater installed. Commercial water heater prices are higher than residential prices. Tankless and heat pump models cost more to buy, but their lower monthly running costs offset the initial water heater cost and installation. Find the best water heater replacement for your home with our residential water heater selection tool.

A.O. Smith's Product Line

The A.O. Smith product line is diverse, covering almost every possible water heating application. Water heater products fall into various families, each covering a distinctive market niche.

Water Heater Size and Capacity

A water heater should be correctly sized to meet the expected hot water demand. Factors that influence the capacity of the water heater include the size of the home, the number of people living there and their water usage. Our water heater product selector helps estimate the best water heater for your home. Alternatively, you can use the Pro-Size water heating calculator for commercial applications. Popular hot water tank sizes include the following:

Power Source and Fuel Types


Gas water heater prices are higher than equivalent electric water tank heaters. However, the monthly cost of running a gas water heater is lower. They can run on natural gas or propane.

Natural Gas

Natural gas prices are very seasonal. The US Bureau of Labor Statistics reported that the October 2023 price of natural gas was $1.388 per therm. Assuming an atmospheric vent gas water heater with a UEF of 0.55, the annual gas water heater cost for a family is $315 and with a high-efficiency condensing gas heater with a UEF of 0.88, the cost is $202.

The most common fuels for water heating are electricity and natural gas. According to the U.S. Energy Information Administration, approximately 38% of homes have piped natural gas. Other fuels include propane, oil and solar. The costs of each fuel vary across the United States and seasonally with demand. To compare the annual cost of different fuels, we have assumed an average hot water usage per family of 64 gallons of hot water per day.


Electricity is relatively expensive compared to other energy sources. The US Bureau of Labor Statistics estimates that the average cost of electricity per kWh (October 2023) is $0.169. Based on this figure, the annual cost of hot water for an average family using an electric water heater with a UEF of 0.93 is $668.

Hybrid Electric

The running cost of a hybrid heater with a UEF of 3.8 is approximately a quarter of a standard electric tank heater, so the equivalent annual water heating cost for a family is $176.


Propane is sold by the gallon. It is more expensive than natural gas but has more energy. At $2.50 per gallon, the annual hot water cost using a standard propane tank heater with a UEF of 0.61 is approximately $403.


Solar power is free, but in practice, solar water heaters need supplementary power for heating at night and on cloudy days. The Energy.gov website estimates that the solar efficiency ratio varies between 2 and 2.9. The SEF is broadly equivalent to the UEF and with a solar water heater with electrical backup, the approximate annualized cost to heat 64 gallons per day will be between $214 and $315.

Vent Type

Gas and propane-fired water heaters require vents to remove dangerous gases created during the combustion process. These include carbon monoxide and nitrous oxides. The vent design depends on the type of gas water heater. Installation of vents should only be done by a professional installer who will check for safe vent operation. Depending on the type and length of the vent, the installation cost of a new vent could be somewhere between $500 and $1,000.

Other Costs to Consider

When answering the question of how much does a water heater cost, you should include other costs such as shipping, installation, utility upgrades and permits. Here's a list of additional hot water heater replacement costs to consider.

tank removal

Removal and Disposal of the Old Heater

Don't overlook the removal and disposal of the old water heater. A tank water heater is heavy and may need special equipment to remove it from your loft or basement. Allow at least $100 for this and, if access is difficult, as much as $400.

Home Renovations and Tank Relocation

Water heater replacement is a good opportunity to do changes and renovations. Additionally, some additional costs are inevitable, such as if the contractor has to remove a wall or relocate the water heater to a different position.

Fuel Conversion

If you're converting from electricity to gas or installing a gas tankless system, allow for the costs of running new gas lines. An approved professional must do gas line installation.

Thermal expansion tank installation

Extended Warranty

 A.O. Smith water heaters have excellent warranties. Some units have a 5-year limited warranty, others have an 8-, 10-, 12- or 15-year limited warranty. It's best to check your warranty on the warranty verification webpage. Extended warranties of 2 and 5 years can be bought.

Repairs and Maintenance

Most water heaters require annual maintenance. This includes checking items like the T&P relief valve, anode rod and vent system. An annual maintenance contract will ensure the water heater is kept in peak condition and give peace of mind should anything go wrong. Alternatively, search for an approved heater repair and service provider near you.

Shipping Costs

Water heaters are bulky, so if you're buying from a wholesaler, allow for transport costs from the wholesaler to your home. Prices vary depending on weight and distance. Shipping costs vary from $100 for in-state shipping and up to $400 for cross-country shipments. Alternatively, save on shipping by buying from an A.O. Smith-verified plumber in your area.

Installation Costs

For one-for-one water heater replacement, allow around $200 to $400 for installation costs. This figure assumes easy access and minimal new installation work. If there are major changes, then expect costs to be nearer $1,000. You will pay more for the installation of a tankless water heater. Before going ahead, get an estimate from an approved A.O. Smith water installer near you. DIY installation is not recommended, as there are many technical and regulatory factors to consider, and improper installation may void your warranty.

man checking manual

Electrical Upgrades

If you are switching to an electrical tankless system, you may have to upgrade your electrical service panel. Electric tankless heaters require between 100 and 140 amps, depending on the model.

Permits and Inspection

Installation of gas appliances, plumbing changes and electrical installations generally require a permit from local authorities. Permit costs differ, but in total, they may come to between $100 and $500.

Expansion Tank Installation

Many cities require the installation of an expansion tank. The tank accommodates the expansion of water as it heats up and relieves stress on the water heater and plumbing. You must have one if there's a check valve or pressure-reducing valve on the water line. Expansion tanks cost less than $100 and are installed in the cold-water line near the water heater.

service provider