Should I Buy or Rent a Water Heater?

A Tribute to Future You
How Will You Spend Your $1765 Tax Refund?

A recent CBC article and a reader request have got me thinking about water heaters.

Water heaters are just the kind of thing that you never seem to think about unless there’s a problem. And then it can range from an annoying First World Problem (no hot water) to a serious issue (lots of water gushing everywhere).

Fortunately, we have several choices when dealing with water heaters. Today we’ll walk through how to make the most of those choices, and specifically whether it makes more sense to buy or rent a water heater. Remember, be deliberate in your decision-making so that you can optimize how to best spend your time and money!

Coles Notes Version: It is probably cheaper to own. Read on to see why, and under what situations it’s actually better to rent.

It’s probably cheaper to own, but it might still be better to rent in some cases.

What Do You Need to Figure Out?

Obviously, your primary choice with respect to water heaters is whether to own or rent.  There are two angles from which you can approach this decision:

  1. You already own a water heater and you need to decide whether to keep owning or start renting
  2. You already rent a water heater and you need to decide whether to keep renting or start owning

If you already rent, then you also likely have the option of buying out the heater that’s in your house right now, or purchasing or renting a new one from elsewhere. Oftentimes, this decision comes when there’s a problem and you’re in a bind. But sometimes you can plan ahead and save some serious dollars.

Is it Cheaper Buy or Rent a Water Heater?

It’s pretty easy to figure out the answer here. Get some quotes to buy and rent, and then figure out when the crossover point occurs.

First off, there are three primary types of water heaters:

  1. Conventional “direct vent” tank (exhaust rises naturally up the chimney)
  2. Conventional “power vent” tank (has a fan on the top that blows the exhaust out a vent tube)
  3. “On-demand” or “tankless” water heaters

Get two or preferably three quotes on a new water heater and installation

Ask for the life expectancy of the water heater. (The warranty they offer is a good hint at how truthful the installer is.) Be sure they include all work necessary to bring your system up to code, paying particular attention to whether any venting or ducting requires upgrades. Your venting would have met code when it was originally installed, but it might not meet the current building code in your local jurisdiction. If you replace your heater, it will typically need to meet the current code.

Get a quote to buy out your current water heater if you’re already renting

Be sure to ask how old the heater is and what the remaining life expectancy is. Caution: They may overstate the life expectancy so that they can charge you more. This is the easiest option, but often the payback period makes this the most expensive option when you consider how old the tank is.

Get a quote to rent a new water heater

If you’re already renting, just go and grab your latest bill. Bonus points if you have older bills from the past few years that show how much the price has increased over time. You should also call another company or two for rental quotes. Be sure to understand the terms and conditions, particularly the cancellation policy!

Do the (simple) math

The math here is very simple. Figure out the “payback period”, also known as when buying becomes cheaper than renting. Simply divide the purchase price by the monthly or annual rent to figure out how many months or years until owning becomes “free”.

Payback Period (in years) = Total Purchase ÷ Annual Rent
Payback Period (in months) = Total Purchase ÷ Monthly Rent

If you plan on keeping the water heater and the house longer than the payback period, it is statistically cheaper to own. If you plan on moving sooner, then it is cheaper to rent.

Over the years we’ve replaced two rental heaters with newly purchased ones. One was a conventional direct vent and the other a conventional power vent. In both cases the payback periods were around 3 years. This was abnormally good; usually I think they come in around the 5- or 6-year mark. Read the tips section below for how we pulled it off!

Is it Better Buy or Rent a Water Heater?

Now things get a little trickier.

What about repairs, etc.? Well, I did not include them in the section above. Generally speaking, I think you’ll find that renting is more expensive. That is because when you’re renting, you are also paying for an insurance plan to cover repairs and maintenance to the unit.

On average, across thousands and thousands of units, it is statistically cheaper to not pay for insurance. Why? Well, the insurance company has to make a profit, so it is their business to predict the failure rates and repair costs, mark them up, spread those costs across all customers, and charge you for your share. On the other hand, if it is YOUR unit that fails, it could be pricey.

That is, unless you self-insure.

That means that you save a little bit each month or year to cover unexpected costs to repair or replace your water heater. This is extra important if you are buying out the heater already in your house and it is approaching the end of its lifespan. That’s why you need to get that information when you’re collecting quotes.

So, while it is generally cheaper to own, you may still find it better in your case to rent because of one of the following situations:

  • You won’t be in the house long
  • The water heater is getting old and you don’t trust it anymore
  • Your personal financial situation makes it difficult to either self-insure and/or cover unexpected repair or replacement costs

Special Tips & Tricks

Here are some random tips and tricks to consider when you’re trying to decide whether to buy or rent a water heater…

New Scratch and Dent Water Heater

New scratch and dent water heater. This tank was a few months only when we bought it in 2015. You can actually see one of the dents a quarter of the way up the left side. You can also see beige paint near the bottom from the previous installation.

  • Check your current rental contract for cancellation fees; in my case, the fees were $100 if I cancelled within 1 year of a new tank being installed, $35 or so if I cancelled within 10 years, and free if I cancelled after that.
  • You might be able to negotiate out the cancellation fee if you’ve been with the rental agency for a long time; I was able to do that with one of my two cancellations.
  • Look for scratch and dent options on new water heaters. This is nice if you can plan ahead and wait for one to become available. I’ve personally purchased two scratch and dent units from Roy Inch and Sons for different properties. They came in at about half the price of brand-new. One had been used for a few days, and the other for a few months. (No, this is NOT an affiliate, and I will not receive any commission or fees, etc. This is just a money-saving tip I discovered. Although in the interest of full disclosure, they did sponsor my softball team several years ago, and I still play ball each year with their top salesperson. Drop me a line if you want his contact info.)
  • Consider buying a tank directly from a big box store such as Home Depot, Rona or Lowes. Just be sure that you are installing it up to code. This is particularly important if you have a gas water heater. You might need to enlist the services of a licensed gas technician. Factor that into your costs.
  • Watch out for the upsell. Many salespeople will start you off with the highest profit unit until you start asking questions or poking around for discounts.
  • Always wait before making your decision. You need to sleep on things before committing to a big decision.
  • If you are currently renting and need a new tank because the old one failed, be sure to ask about cancellation policies and any other hidden costs. This actually happened to us, but thankfully I only had to wait one year for the cancellation fee to drop down from $100 to $35ish. Because I knew that before agreeing to the “free” replacement, I was able to easily decide to go with the rental in the short term and then do more research and quoting afterwards.
  • Never, ever deal with any salesperson who comes to your door unsolicited. They are notoriously unscrupulous. If you don’t believe me, then check out these new laws on the subject here and here from Ontario. Always deal with a reputable company, check the Better Business Bureau, read online reviews, and/or get referrals from friends and neighbours.

Pencil with ShadowYour Turn Now!

Have you ever had to choose whether to buy or rent a water heater? What did you choose and why? And perhaps more importantly, do you have any additional tips and tricks that you’d like to share?

A Tribute to Future You
How Will You Spend Your $1765 Tax Refund?


  1. Great breakdown! I’ve got a funny situation, living in a duplex that contains two hot water tanks. One is rented, the other is owned. I’ve done the math and it seems like it comes down to something pretty simple – owning would be the less expensive option, but renting brings peace of mind at the price of $X.00/year. Then there are rental properties – is it better to own or rent? Well then you need to question, how long will I own this house for, and will it have any affect on the sales price? Typically it makes little/no difference on the sale price of a rental property, so renting is great if you only plan on owning for 2-3 years and don’t want to worry about another thing to maintain, especially if the tank is getting plenty of use in a multi-family building. So many factors to consider, if only there was one answer we could all use! Great post 🙂

    • Chris Urbaniak says:

      Thanks Kellan!

      Yes, I think that “owning would be the less expensive option, but renting brings peace of mind at the price of $X.00/year” sums up the key point quite nicely. “So many factors to consider, if only there was one answer we could all use” – and that is exactly why sometimes you have to teach a man to fish instead of just catching it for him… Unless he’s vegan, in which case we should probably be talking about wicking gardens instead 🙂

      Seriously, though, it really does come down to running your numbers and making a deliberate choice.

  2. Paul Morrison says:

    Another important note: If you’ve been locked in to something as a result of someone coming to your door, or if you have a ridiculous contract termination provision, consult a lawyer who does consumer protection act work. Sometimes there are grounds for recission of the contract (a court declaration that the contract is void), in some cases the company might actually be ordered to pay punitive and aggravated damages to you for their deceptive or unconscionable practices. Many lawyers will give a brief consultation without charge.

    • Chris Urbaniak says:

      Good point, Paul.

      Just because we have laws to protect us does not mean that there won’t be people who still try and flaunt the laws. There are so many situations like that, and I’m sure a lot of folks would be embarrassed to try and pursue a resolution. But it can certainly be helpful, as you’ve no doubt seen in your work. Thank you for the reminder to everybody out there!


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