It is quite common for homeowners to rent their hot water heaters here in Ontario. The rentals cost anywhere between $15 for an old tank to $20 or more for a new one. Years ago, we stopped renting our old water heater and I’ve been meaning to replace it for a while now. But, what with one thing or another, I never got around to it even though Michael James warned everyone on the mess that a leaking water heater makes in your basement.

Well, last weekend, I finally paid the price for keeping an old, rusted, water heater around a little too long. The bottom of the old water tank had rusted through and leaked water into the furnace room and to my basement office. After shutting down the valve, draining the heater and cleaning up the mess, I went shopping for a replacement. Home Depot carries water heaters and offers installation services (for some reason, Rona doesn’t) and for a fee, is willing to do a rush job. Here’s what installing a new tank will cost you:

GE 50 gallon gas water heater: $683.00 (60 gallon tank: $712.00)

Water heater measure: $40.00
Installation: $300.00
Weekend, evening & holiday fee: $165.00
Haul away & dispose: $40.00
Total Install Charges: $545.00

Grand total (including GST): $1,289.40

We’ve stopped renting for more than 4 years now and the old rental was costing us $13.99 every month. Installing a new heater and then renting it costs about $20 per month in addition to certain one-time installation fees that are charged upfront. Netting out the savings of about $750 over four years from buying out the old water heater, the new tank cost us $540. If renting the same heater costs us $20 per month, the new tank will break even in just over two years. Plus we will be on hook for any maintenance or service calls.

It seems to me that owning a water heater is much cheaper over the long run than renting it as long as you are willing to absorb the expense of an unexpected maintenance call. Perhaps, that’s why homeowners in most provinces do not bother with renting and it is time Ontarians wise up to how much renting our water heaters is costing us.

This article has 49 comments

  1. Sometimes renting does have some perks though. When renting, you have all service calls and parts covered as part of your rental payment. Depending on what hot water tank you have, that can be very useful. For example – my story. :)

    We use our ultra high efficiency Polaris natural gas hot water tank to provide hot water for domestic use as well as heating our house. The tank alone runs somewhere in the $4500USD range (yes, that has the right number of zeros) and I do pay a rather steep $45/mon to rent the tank. However, we had major problems with the tank for the first 4 years we had it. In total I think almost $4000 worth of parts were put into it by Direct Energy, not to mention being out for countless priority service calls since we also used it for home heating.

    The last Direct Energy tech we had come out was one of the senior techs and he spent a good couple hours looking at everything and it seems he found the source of all our problems. Yippee!

    You can start reading all about it on my blog: http://ivany.org/polaris-high-efficiency-gas-hot-water-tank/

    Would I rent again? Probably not but I think I’d take the monthly difference and put it aside for when that service call is going to happen. That’s the part a lot of people have trouble with – they get caught having no emergency fund to cover stuff like that.

    • Re the reason people rent hot water tanks in Ontario is, among other things, because new home builders put them into the homes they build. They pocket the cost because the price of the house has little to do with the cost of building and the idea of having a rental, or not, is a little ambiguous because of advertising. Price of the house is unaffected. So, there are many thousands of houses stuck with these people who, together with other similar legal crooks, are far more a drain on society than any social welfare program.

  2. I’m sorry to hear that you got caught the same way I did. I’m convinced that owning a tank is cheaper in the long run for people who can handle modest-sized unexpected expenses. It is people who manage to spend every penny they have each month who need the smooth rental payments even if it costs more in the long run.

  3. Owning is going to be cheaper, otherwise how do the rental guys make their money? They probably get a bit of a discount on the heaters in bulk but absorbing the service costs — and all the externalities that come with assuming almost all responsibility for this — and yes they will charge some premium.

    You don’t rent a car, why would you rent a hot water heater.

  4. I have to admit I am still renting, just over $20/month after tax. Can’t say I have a justification for this – I’ve read all the opinions, but haven’t bothered to do anything about it. Nearly 5 years in the house (heater is over 6 years old now), and there’s been one service call to replace a sensor, which the repairman claimed would have cost over $300 (mostly the service, not the part) had I owned. Suppose I could put in an exploratory phone call to the utility, and see what the buy-out price is now.

    One thing to consider might be how long you intend to live in the house. If you’re a year or two away from moving, that’s probably not the best time to buy out the heater. Most prospective home buyers aren’t likely to place any value on the heater, whether rented or owned. Could be a selling feature for the right buyer however.

  5. Jeff, your Polaris heater is not the run of the mill heater most of us are accustomed to. It almost amounts to untested technology vs the tried and tested GE units. So, if you want to lay out the $$, renting is a good option. Out of curiosity, what kind of a warranty do you get with them?
    I replaced a water heater 3 years ago and tried to get hold of Direct Energy to inquire about rentals. It took them a week to get back to me. That marketing strategy scared me off so I bought a new unit.

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  7. @stewart: Since I’m renting, it doesn’t really matter what the warranty is. All Direct Energy rentals include the “service plan” at “no cost”. That said, I believe the Polaris is 10 years on the tank and 1 years parts, both limited. I can’t fault the Polaris (anymore) because it turned out that it wasn’t installed properly by Direct Energy (or their subcontractor, not sure). The computer controls in that rig are very sensitive to a poor ground and that appears to be the cause of all my problems.

    With my hybrid system, I’m sort of stuck with keeping a similar setup or replacing everything with a new hot water tank and furnace. I’m not ready to bite the bullet on that $10k (quoted) cost.

    One more thing – if you need to replace a natural gas HWT and are planning on selling your house in the next couple years, just install an electric tank. The capital cost of a natural gas tank is a much much higher than an electric and any Joe can learn how to solder copper by watching YouTube videos.

    Oh, and @jesse: People do rent cars all the time, it’s called leasing. It too has it’s pros/cons.

  8. You might also want to consider installing something to shutoff the water in case of a future leak. For example:

    http://tinyurl.com/2eucved

    There are some that shut the water off at the main line, and some that shut it off at the leaking appliance. I hear if you’re going to install a lot of them the main-line system is cheaper, and for just a few the individual ones are cheaper.

    I don’t have a house yet, but when I do I plan to put something like this under the water heater, washer, and dishwasher.

  9. Canadian Capitalist

    @Jeff: I agree. If you can handle it, self-insurance is cheaper in the long run. It does seem to me that renting is at least competitive with owning in your case.

    @Michael: Yes, I do wish I had acted on your post. It would have saved me a lot of weekend aggravation plus $165. Oh well…

    @jesse: I agree and everything I’ve learnt since I stopped renting convinces me that most people would save a ton of money if, like most other things, they simply own their HWT.

    @Ben: I agree that those planning to move shortly would be better off renting and passing the contract over the new owner. $20 per month is pretty steep for a rental and it would be worth exploring buying out the unit. There used to be a Direct Energy buy out schedule lying around but I’m not able to find it anymore.

  10. I’m in Manitoba and the first I heard of rentals when I noticed an income trust whose primary business was renting out tanks. Here the tank is considered part of the house just like th furnace. Out of curiosity, how old was your old tank when it died?

  11. Did you consider buying a tankless gas water heater?
    I’m considering replacing my rental HWT and buy a tankless unit. I understand that the upfront price is significantly higher (maybe as much as twice the price of a conventional HWT). Any comments?

  12. Canadian Capitalist

    @TonyR: I believe the tank was about 20 years old. That’s pretty old for a HWT and it’s not surprising it rusted through.

    @Edwin: I did not investigate tankless heaters this time but I did a while back. I did not get written quotes but IIRC verbal estimates were more than $3,000. Needless to say, I didn’t pursue it further.

  13. @Edwin: Tankless can work (financially) if you use *a lot* of hot water, and use it for long periods at a time. Tankless systems work quite well at providing a constant temperature but it’s the startup that can be lacking. With most units, you need certain flow rates for them to even turn on. A few co-workers of mine have installed tankless but more for the space saving aspect. They work but you need to adjust your expectations as they behave differently than that big storage tank full of hot water.

    Now, all of this is with Natural gas being the cheapest form of heating (which it is and has been for a really long time even with the spike a couple years ago) and electricity also being artificially low cost.

  14. I’m a little bit confused by the math here and I don’t quite see how renting is a bad deal.

    I think part of the confusion for me is that the savings on the old tank are getting mixed up with the cost of the new tank which I’m not sure makes for a clean analysis.

    So let me give you an example from my current situation. I have an old tank that I rent that is getting close to the end of its life. In fact, Reliance Home Energy was in a little more than a year ago because the pressure release valve was leaking and the service tech said that the tank should be replaced soon. I need to get our main water shutoff valve fixed first because that doesn’t totally close properly and the valve to the tank also doesn’t close properly either (can you say ticking time bomb?). My current rental cost (taxes in) is about $43/quarter or about $172/year. So in order to come out ahead by spending $683 on a tank and $340 for installation/water heater measure(?)(total $1023) I would have to have a water heater that operated problem-free for just under 6 years (5.94 years = 1023/172).

    That assumes that I wouldn’t have to pay the extra evening/weekend fee or anything for the removal of the existing rental unit. I suppose that having a water heater run problem free for 6 years isn’t expecting too much but I would think that right around the 6-8 year mark is where you would start to have minor things go wrong (like the pressure release valve or something else that would cost $150-$250 to fix).

    Am I missing something here?

  15. Canadian Capitalist

    @0xcc: I’d be very surprised if you get a new tank installed and then rent it, you’d still pay $43 / quarter. I called around a few months back and found that a new tank will rent for about $20 / month plus taxes.

    Let’s run the numbers for a new unit. Let’s say it will cost you $1,023. The same unit would cost about $20 per month to rent. The break even would be $1,023/$240 = 4.26 years. Of course, you’ll have to bear the cost of any maintenance call but it seems to me that ownership costs will run about half that of rental costs.

  16. I admit that I haven’t checked what the rental rate would be on an updated tank. That is something to consider. The other thing to consider is that in order to not start breaking even in 4-6 years (depending on how much the monthly rental is) something would have to go wrong every year that costs more than the yearly rental would cost. I think that something going wrong every single year is probably unlikely.

  17. I had to replace my HWT last year when the old one rusted through and leaked in my basement (thankfully the floor drain in my utility room is right next to the tank, so there was no water damage). I didn’t even notice something was wrong until I had a cold shower the next day.

    Anyway, I’d been in my house for 5 years of trouble free HWT ownership when it died. Considering it was the original tank (dying at 17 y/o), and gave no problems in the last 5 years of its life, I see no reason why a typical natural gas tank can’t give the 5 years required to break even compared to renting.

    And as an aside, our replacement cost (40 gallon tank, natural gas, 12 year tank warranty) was ~$800.

    We considered switching to a tankless system, but figured (I don’t remember how) that it would take 10+ years to recover the capital cost, ignoring the opportunity costs associated with the higher upfront costs. We only plan to be in the house for a couple more years, so it didn’t make sense for us.

  18. People rent hot water heaters in Ontario? What a bizarre concept. Never heard of that here in British Columbia. Do you typically rent your furnace and stove too?

    I’ve just replaced a 50-gallon electric hot water tank in our cottage in Washington State. Cost was $875 USD all-in including new piping to fit an expansion tank, strapping to meet new earthquake codes, and a new electrical line. That also included a $125 surcharge for the plumber to travel 100 km and go through two border crossings, twice. I was wondering how that would compare to a Canadian install – now I know…

  19. I live in Ontario and got into water heater rental contract unknowingly as part of my new house purchase.
    People here don’t rent their furnace, fridge or TVs so I never really understood the logic behind water heater rentals.
    Last January I got rid of the rental and purchased a new brand new one from Home Depot, paid similar to what CC paid.
    I got a tax refund on it as part of the Home Renovation Tax Credit and avoided HST on top of rental fee that is coming on July 1.

  20. I’m on my third home and also my third rented water heater. Yes, it is cheaper to buy than to rent, but as Jeff pointed out, when it craps out, you call the (in my case now) power utility’s 24-hour service number and it’s their job to get it fixed.

    I would equate owning versus renting a water heater to owning versus leasing a car. People who lease cars like the peace of mind that comes from always having a new car and having someone else be responsible to service it. Other people don’t mind driving an old bucket until the wheels fall off.

    For me, I’ve been in the category of driving the old bucket but have been starting to think that when the wheels fall off my current bucket, I may switch to leasing my next car… I’m actually only on my second car now. My first car was one bought after it came off (someone else’s) lease. My second (current) car I bought new. I may try the leasing route the 3rd time around, or else buy one that came off lease. I don’t see me ever buying a new car ever again.

  21. Re: tankless water heaters

    No I don’t sell them. I’ve had one for two years.

    Here’s something to ponder when calculating the cost of a tankless water heater… how often do you require hot water during any given day? Let’s assume a family of four (two working adults and two teenagers [worst case ;-)) ]).

    4 – 15 minute showers in the AM
    4 to 8 – 1 minute hand washings
    1 – 45 minute dishwasher session

    By legislation, your hot water tank must maintain a 140F temp. Assuming you’re on gas (tankless doesn’t make sense at the present hydro rates) that’s energy used to maintain 140F 8760 hours a year versus what, 400 odd hours?

    Given inevitably rising energy prices it seems to make sense that tankless is the way to go. Heck, they’ve been using them with great success in Europe for years.

    FWIW

  22. @Keith: can you give a pointer about *legislation* requiring to keep the hot water tank at 140F? I’ve read in many places recommendations of keeping it at most at 120F, to avoid scalding.

    I don’t want to start a flame war, but I did the math and checked it more than once, and financially the tankless water heater makes sense only if you use lots of hot water. It also give you limitless amount of hot water, which also is needed in this scenario. However, if your family is small and/or uses less hot water, the payback period is insanely long. In my case, using the current prices, payback is 13 years. Also, keep in mind that the tankless heaters are a lot more complicated and fail more often than the simple tanks, so the service calls add to the costs. As always, all can change if the gas price goes significantly higher, but that’s a bet.

    Of course, there are other things to consider, you may care more about the environment than about your wallet, for one, or you have a big family and need the limitless hot water feature. But strictly financially – it’s a PF blog, after all – I think there are few cases in which you may win with a tankless. And I’m sure not one of them :-)), although you may be.

    I have to mention that I’ve had both tankless and tank, so I can do some comparison. As for Europe example mentioned by all the tankless promoters, they are widespread because of a few factors (at least for the part I’m coming from):
    - the heaters are usually mixed units, they also provide hot water for hydronic systems which heat the house.
    - price: for less than the price of a furnace here, you can get a full system including a mixed unit and room radiators. So the water heater itself may be considered “free”
    - they are smaller in size, which is important for smaller houses and apartments
    - the price of energy is higher there

  23. @Keith,

    Also keep in mind that many of those hours when the water is kept hot are heating season hours. Here in S. Ontario the heating season is typically end of Sept. to May so any heat loss from keeping the water hot is not really lost at all as that heat goes into the house.

    FWIW, for my family of four (two teenaged girls) I calculated the payback period to be 21 years for a tankless (not factoring in the lost opportunity cost of the price difference) vs tanked.

  24. @Vasile,

    No worries, I didn’t take any offense, I’m not a flame war kind of guy anyway.

    The rules are slept out in building codes issued by the Canadian Commission on Building and Fire Codes. I’m sorry, I did not take the time to read and locate the exact page reference in the code (if you’ve ever tried reading building codes you’ll know why).

    Here’s a link to the Canada Safety Council’s article referencing the scalding issue and building code requirements. http://archive.safety-council.org/info/home/hotwater.html

    Regards

  25. @Keith @Vasile – I’m not sure if it’s required by law/code in Ontario but when the hot water tank was replaced prior to me purchasing my house, they “had” to install a mixing valve on the hot outlet. It’s supposed to keep the hot water temperature at the taps below 120F even though the tank is at 145-150F (we use our tank for hydronic heating also). It mixes cold water into the hot water for anti-scald while ensuring the tank stays above 120F to prevent Legionnaire’s bacteria.

  26. Hmm. in the GTA, My 60g electric hot water heater from direct energy is $10.99+gst (well, +hst shortly)… so rentals can be had for less than $20 a month. We’re on a well (city water is available at the street now), but the water is pretty hard. The tank seems to suffer a bit. In 12 years, we’re on our 3rd one… I’ve considered purchasing, but so far I’d come out behind if I did that :-) They’re pretty good about coming in and switching them out, and never cost anything extra. If it went up to $20, I’d give serious thought to switching, and move to gas when we do.

  27. I don’t like the idea of heating a storage tank during the week when I’m not at the cottage…
    Just curious: have any of you out there considered switching to a tankless water heater for the cottage? What were your reasons?

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  29. I monitered my hot water heater gas usage for three years. It used roughly 0.8 cubic metres per day on a 12 year old conventional vent 40 gal unit. That’s not alot of gas. Newer units are more efficient @62%. Tankless are around 82%. Not too much of a difference again to warrant the extra capital expense. I’m sticking with the old style because they are simple and repairable by the DIYer. Most people don’t realize that there is a consumable anode rod in the tank that can be replaced. Annual PM will prolong tank life and efficiency. No venter motor, if possible, will help ease future maintainability issues.

    CC – when I was in Home Depot, I saw a sign about lifetime warranty on water heaters for $99. Did you inquire?

  30. Canadian Capitalist

    @Jeff: I believe building code now required anti-scald devices to be installed in either the heater or each of the faucets. But, I did not include it here because I signed a waiver to not have them installed. I believe they cost about $185.

    @Chris: I think Home Depot provided an extended warranty for no charge beyond the 12 years. I didn’t look too closely because warranties like these are riddled with exclusions. I wouldn’t pay anything extra for any warranty.

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  32. CC – you say people should ‘wise up’ to rental costs but then go on to say in a post that basically you didn’t bother to follow up on the tankless water heater option. A 2 second web search shows home depot tankless wh are in $1000 range. (Even with install there’s no way its up to $3000). I’m just saying – it could have been a viable option if you dug into it a little more.

  33. @kabe : What you won’t find from the HD site is how much it costs to install a tankless direct vent because it varies for every single installation.

    Your current hot water tank location is probably not acceptable for tankless unless you are replacing a very new direct vent unit (in which case, why bother going tankless now? Wait until the tank dies.). I have co-workers who bought ~$1200 tankless units through Costco (Rinnai?) and ended up with >$3000 in total costs because they had to move the tankless to a different location. Gas lines are expensive to move/extend, copper isn’t especially cheap, electrical work and direct venting has to comply with numerous building code requirements.

  34. Canadian Capitalist

    @kabe: Fair enough. I admit I didn’t look into tankless but I never even thought of it as a serious option due to my previous investigations. I asked around for quotes on tankless when I was earlier looking to replace the HWT (but obviously did not follow through). The price I was quoted (verbally, based on my description of what we have) was that installing a tankless would cost *at least* $3,000. The reason they gave me then is that a tankless would require a new gas line, new venting and extra plumbing since the unit will be wall-mounted. If there is so much work involved, I won’t be surprised if tankless costs at least $3,000 installed.

  35. Canadian Capitalist

    @kabe: I vaguely remembered Ellen Roseman writing about tankless heaters. Here they are:

    Do the math before you take on a tankless job

    and

    Tankless water heat not so hot

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  37. High efficiency HWTs are notorious for breakdown with all of their active components and are very expensive to fix out of warranty. I chatted with an installer once and he said to avoid them like the plague. If you have a chimney in your house go with a low tech standard efficiency tank unless you go through an insane amount of hot water.

    Regarding rental tanks, Direct Energy does not proactively replace them based on age. You have to call them up and complain about rust in your water or have an actual leak. That’s pathetic customer service in my opinion, waiting until the customer actually suffers water damage and an outage before doing anything. More money in their pockets I guess.

  38. I have to admit I am still renting, just over $20/month after tax. Can’t say I have a justification for this – I’ve read all the opinions, but haven’t bothered to do anything about it. Nearly 5 years in the house (heater is over 6 years old now), and there’s been one service call to replace a sensor, which the repairman claimed would have cost over $300 (mostly the service, not the part) had I owned. Suppose I could put in an exploratory phone call to the utility, and see what the buy-out price is now.

  39. We moved from BC (to Ottawa) and the house had a rental. Reddish coloured hot water compelled us to look into changing it. I learned that shopping around had huge benefits.

    A new Direct Energy rental was quoted as (I think) $16 per month. However, there was rental competition…a well known Ottawa installer offered rentals for $3 less per month with the first three months free (and they take away the old one, install, service any problems, etc).

    However, as a personal preference I prefer to own. We researched tankless…I believe the cheapest quote I received for a mid size Navien was $2,700 or $2,800 installed. That was more than I wanted to spend. I ended up getting a 50 gallon natural gas w 8 year warranty (same brand DE uses) for $875 plus taxes installed. What surprised me, was the company who sold it had the best service I’ve received in a long time (were super careful, very tidy, covered 100% of floors with thick mats, left bathroom (which we told them to help themselves to) cleaner than they found it, etc). Meanwhile, other quotes I received were several hundred dollars higher.

    Only reason I mention it is that it’s possible to get for cheaper than CC’s price, so factor that into your buy versus rent decisions.

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  41. We have just moved to the southern Ontario area. Our house is 140 years old, with one of
    those low stone basements. The house is heated with forced air, but has a small (15 by 6 ft)
    room heating with radiant floor heating. There are 2 tanks in the basement. #1 is rented for
    $12.00/month, gas, and only supplies the radiant floor heating. It is not working, rusted out,
    and leaking all over the basement. #2 is a 12 year old electric model which supplies the rest of
    the household hot water. It works well, but appears to be very rusted as well. Direct energy sent
    a plumber out to evaluate our situation….and states that the only unit available that can run both
    systems is a Polaris high effeciency 34 gal. Apparently we are limited as to what can be put in
    by the height of the base ceiling. The rental on the unit is $62.00/month plus HST. Very high. But
    I don’t think we have a quicker alternative.

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  43. I’m trying to get out of an agreement with a horrible oil delivery company from whom i also rent my hot water heater (it was already here when i bought the home). There is a buy out clause, which i’ve considered, which allows a 1/60 deduction in the reimbursement of the installation cost of the heater ($500) and a 10% depreciation on the value of the equipment ($1000) per full year. My problem is that the prices that were written into the agreement would only be reasonable if the equipment was new and the installation had just been done on the date i signed the agreement. However, i know the previous owners and am sure the equipment was here for at least 1.5 years prior to my purchase of the home. I’m going to speak to the company but i find it highly unethical that on the agreement they used new costing rather than a value that took into account the depreciation that had already occurred. My contract is with Thermoshell. Anyone have any info on this issue?

  44. BP $875 installed. You failed to mention wher u purchased tank and who installed it. What is the warranty on parts and labour. I cannot find a 50 gal. tank (direct power vent natual gas) for under $900 plus install $400. thanks

  45. @Kathy Sometimes those contracts can be terminated when the ownership of the home changes. Check that out first.

  46. I was shopping for a gas water heater @HD and the guy who worked there told me that by law, Ontario law, I must also install an anti-scald device which costs about $200 (forgot to ask if the cost includes both the device and installation). I am shock! I meant, I can’t believe it. I don’t like my water temp to be controlled, I specially don’t like to pay $200 for it, I don’t have kids and senior living here and why????? I also read that if you rent a unit, you can either install the device or sign a waiver. Can I sign a waiver if I buy a water heater??? HELP!!

  47. CORRECTION:

    RONA does sell and install water heaters. 50 Gallon units start at $620. The product is GIant and has a great service record.

    Installation charges at RONA start at $180 for gas installation.

  48. I rented a low eficency water heater for over 20 years so when it leaked I wanted to buy one.I discovered at Home Depot they cost about $1000 plus instal.So once again I rented with an option to buy after a year.Boy am I ever glad I didn’t buy.After a little more than a year it broke,so a service man came to fix it,he said it was a thermal couple but can you believe they don’t have parts so I had to order the part,& they couriered it & then I called a service man for a second visit install,I kid you not ,it still didn’t work.It was finally fixed after 6 service calls,can you imagine the expence if I owned it

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