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moneysense.ca, 5/07/06
Renting a Water Heater
Just the other day, I was browsing the Personal Finance bookshelves at my local Chapters store and leafed through a book titled The Smart Canadian’s Guide to Building Wealth. I almost skipped over a chapter that advised against renting-to-own when I noticed a sidebar titled “A Note to Ontario Homeowners”. The note asked why the vast majority of Ontario homeowners are wasting their money renting their water heaters.
I must confess that we fall in the category of renters and it never occurred to me that we could buyout the rental. The heater in our home is over 15 years old and is likely in its last legs. I found that Direct Energy charges us $13.99 plus taxes for the rental and it would only cost us $25 for a buyout (owing to the age of the heater). I went ahead and purchased the old heater and I am hoping it would last a year or two. If it breaks I will just buy a new heater and have it installed by a professional.
New Heater: Less than $1,000 installed. Rental Heater: $13.99 (in today’s dollars) over 15 years = $2,500. Owing your own water heater: Priceless.
moneysense.ca, 5/07/06
Or at 3.25% compounded annually (not including rate increases) $3,230! Plus you would likely install a high efficency unit and save even more!
DAvid
I had never heard of anyone renting a water heater…this must be unique to Ontario. One wonders how the practice got started. A word of advice though, at 15 years of age, the water heater is past replacement age and is very energy efficient, as it is now full of corosion. For highest energy effeciency, experts recomend replacing a water heater every 5-10 years. Of course there is new waterless water heaters that a more energy effiecent as they hook right to your pipes, don’t hold water and thus only heat water when you actually need it. They are more costly upfront, but the savings in the long run could be priceless, when you see your energy bill go down.
hmmm… interesting. Reminds of when my parents used to rent their phones from the phone company. Who knew Canada had the monopoly on water heaters?
by the way, regarding your question about WordPress and preposting… all you do is click the edit timestamp box and then pick a date/time in the future. You hit the publish button but it will not post until the date/time that is stamped.
Hope that helps!
The book mentions that Ontarians mostly rent their water heaters and people in the eastern part of Canada have caught on to the fact that it is far better to own.
Nina: Thanks for the info. It is very helpful.
Excellent Post! I just called Manitoba Hydro and bought my rental water heater for $73. I was renting it for $6/mth. I should see the benefit in 12 months. The woman I spoke with said that I had a rare 60 gal, all copper tank that will last me a long time.
Thanks for the helpful post.
One of the income trusts in Ontario derives a substantial portion of it’s revenue and profits from renting water heaters. Maybe one should invest in them!
I’ve never heard of renting a water heater. How bizarre.
I was informed by a friend at work who said tht today’s water heater tanks are made of steel. These tanks will eventually rust and break down. Company’s that produced the long lasting all copper water heater tanks are now out of business. Go figure.
Paula: Renting water heaters is common in Ontario. Every one I know rents their heater.
Ahmed: Our tank is a steel one. Hey, they have a nice racket going here. Selling us steel means we will replace them every so often!
There is certainly a monopoly going on here in Ontario, they aquired all of our existing water heaters form Union Gas in the 1990’s at a low cost and charging us a small fortune for rent ever since. The maximum age of a water heater is 18 years and they’re not suppose to charge rent for them after 18 years but they keep sending the bills. I think it’s their greatest secret and their greed will cause their demize. Everyone renting should be informed about this expiry period.
This is great stuff hope you don’t mind if I add an important bit of information. The tanks get ruined by the untreated water! Call your local Culligan Representative and have the problem solved. Now you can buy your tank it will last almost forever. You will save because it requires less energy and money to heat the water without hardness (rock). The new efficient instant heaters will be protected from hard water also.
Have a Waterful Day
When a water heater is older than 8 years, bascially there will be rust and bacteria inside the water heater, which will slow the effiency of the water heater down, that means you waste energy everyday by using a old water tank, don’t say it still work, just compare the gas bill
We rented our water heater for 16 years from direct Energy in ontario, Problem is if it leaks and ruins your floor or rugs they do not want to pay to replace this they try to tell you to go through your own Insurance Co for the full amount that puts a claim plus deductable on you. I am dealing with this for the last few months..I think I will have to take it to court to get it solved. They should have replaced this water heated it was passed it age, Thats why you rent because they are suppose to know more about water heated and I have paid at lease 2-3 times for one for the idea that they would take care of everything. Right fooled again.
sue: I’m not sure what the rental agreement says. I personally think that it is better to own the water heater and use emergency funds to address any issues.
Have to add my two cents…I’ve installed rental water heaters for 18 years, personally, I think everyone should buy their own. The service one receives from most rental companies, isn’t very good. People often wait 3-5 days to have their leaking tank replaced. The companies don’t want to replace the heaters, and often send service men countless times, to try to repair a tank that is far to old. It’s quite surprising how many people don’t realize how easy it is to switch rental companies or buy their own. There are many different rental companies out there. Reliance, National, Direct Energy, Live Green…just to name a few. Of course, these are all based in Ontario. Also, buying a tank is as easy as going to your local Home Depot, Lowes, Rona, Sears, Home Hardware, Canadian Tire…
Most insurance companies now say they will not cover a water heater older than 12 years, for water damage. The life expectancy of a gas water heater is 12 years.
Renting a water heater makes no economic sense; how many of us rent refrigerators or dishwashers?
See the article in http://www.wecanadians.com about the rental water heater rip-off.
Advice for getting out of a water heater rental agreement without being fleeced for more money still? I’m in a 7 year-old home, but have already paid for the purchase price of a water heater a few times over…. it’s buggin’ me big time.
Just make an offer to your rental company to buy the heater.
I got my heater from “direct energy”. They are willing to sell the brand new heater to me, as installed, for a thousand dollars.
The rental water heater scam is only one of many others. I listed some of the more common ones in an article at:
http://www.wecanadians.com.
Consumers get ripped off by energy resellers, too. In fact, any long term, fixed-price can be bad for the wallet.
Just had Direct Energy take a look at our 14 year old hot water tank. The quote to buy a new 40 gallon tank from them is $1,035 plus about two hours labour (estimate) @ $109/hour, plus GST.
That will work out to about $1,500 for a new installation purchased to own.
The guy sort of tried to encouraged me to rent the next unit. Which is understandable since he makes his living servicing rental units.
In addition to the above cost there is a further charge of between $115 and $165 for incidental charges the installer MAY charge to possibly alter the installation (if necessary) regardless of whether the unit is bought or rented.
Why I would have to pay for this if I rent I do not know. Looks like another little cash grab.
So, to own from Direct Energy it works out to about $1,500 plus maybe the $115 to $165 install fee. To rent it would cost the install fee plus the $14 per month.
Of course, I am considering my options including purchasing (or renting) from another source.
I would appreciate feedback from people who have done the math and made their decision.
Thanks
How much to buy a water heater at the hardware store? Installation should not be that difficult, though likely not a do-it yourself project if gas fitting is involved.
Danno — mine must be a different heater from what you were quoted. I am also with DE, but it’s a power-vent — our rental is about $32 / month.
Wouldn’t recommend buying a new unit from DE. Hardware store and an installer you trust will be by far the cheapest way to go.
My problem is, at least the last time I contacted them, they want to charge at outrageous price (way more than to buy a new heater from a hardware store) for my heater that is now about 7 years old.
arrrrrrrrrg
I just found the 2009 Direct Energy buy-out schedule http://www.directenergy.com/EN/Ontario/RES/Documents/2009_water_heater_buy-out_schedule.pdf.
Comparing their rental prices (http://www.directenergy.com/EN/Ontario/RES/Pages/WHS/BenefitsOfRenting.aspx) with what I own, to buy out my 3 year old tank would cost me $1039.
Dividing the price of a new tank by my monthly payments ($20.81) means I will pay for my tank in 55 months, or just over 6 years. Since it’s projected to last a lot longer than that, I probably should buy it out.
However, an equivalent model on homedepot.ca is listed for $889 plus tax. That means they charge $250 more.
I am not impressed with Direct Energy in any way.
$13.69 /month-where do you live ????? Greater Toronto Area the rent $20.81 plus tax.!!! The new home owner have no option when buying a new home. The “croocks” allways supporting eachothers.!!!
I’m trying to replace the 11 years old water heater–$20.81 plus $2.70 tax= to ?? better not to say it.!!! but everywhere I go, crooks and more crooks.!!!! The “tankless” water heater $2400 ???? I paid less for my first new car.!!!! or $1500 for normal tank.!!!!WOOOOOOOOW
>Owing your own water heater: Priceless.
>at 15 years of age, the water heater is past replacement age and is very energy efficient,
I came here looking for advice, but instead would rather give some: Pay attention to what you’re saying, because you look like idiots.
I had a representative from a company called Summitt come to my home offering a new water tank. I looked at my Direct Energy bill and the cost was less, but my old tank isn’t Energy Star rated and with the savings on my gas bill it makes up for it. Plus they say they’ll cap the increases at the cost of living, a far cry from what’s happened so far. In my opinion why would I fork out $1500 or whatever to own a water tank when if I sell my house it just goes with it? That money is definitely better spent somewhere else. Plus if it breaks then I don’t need to worry about replacing or fixing it, that’s somebody else’s problem.
There are advantages of renting water heaters as well as furnace and air conditioning units as well. On top of the long term savings that Energy Star Energy Efficient products give you, there are companies (Reliance Home Comfort for one), that will replace, repair, not charge for installation and give you 24/7/365 days service. Considering the average maintanance costs for a water heater over 5 years of age and the yearly costs of upkeeping your furnace, this is one way to keep your bills consistent year after year without having a surprise replacement or repair ruin your monthly budget. There are also a large number of government grants which reduce costs and in the cases of furnaces, you can receive a rebate close to $3,000 for simply renting which for all intensive purposes can be added to your cash flow!!
I hope this helps! Feel free to contact me for more details!
BTW-Reliance also has options to finance which is an affordable way to purchase it but of course does not cover a replacement or service costs should they come and surprise you…
Steve must work for the water heater companies…took you guys a while to realize we were talking about you did’nt it?
I wish someone would offer a way to “break the chains” for the utility guys.
Actually James, I work in real estate and over the past few years have found many clients who have been surprised in the past with a bill of over $1,000 to fix their furnace or water heater and are more comfortable paying a monthly rental fee so they have piece of mind knowing they have 24/7/365 guaranteed service…If you think of it as insurance, it may make a little more sense…If it breaks, you get a new one, if it’s dirty, you can get it cleaned free of charge once a year (I am not sure about other companies but I know Reliance does this service), which costs about $100. With a rebate (for tankless water heaters) from the government of about $680 and a rental fee of around $40, you in fact are getting about 17 months free rental. On top of this you are saving between $20-$40 a month in gas fees and have no obligation to continue renting should you needs change.
I haven’t even mentioned installation fees but will mention that the typical life of a water heater is 10 years.
I understand the insurance concept. But it’s seem bloody expensive insurance to me. In the 8 years I’ve been renting my water heater, I calculate I’ve paid for it more than 3 times over. As was stated, if they have on average a 10-year lifespan (in my experience it is much much longer than that in soft-water areas), it may be evening out the cash flow, but I’m really not getting good value for money.
Well if your math is correct, you must be paying an extremely high rent. A typical 60 Gallon Power Vented rental is $23 while a Conventional Tank is about $16. Installation and purchase price if you are buying this equipment will be aroudn $1,100…If you are renting, you should see if you have outs on your contract and contract a company that offers the best service, price and one that doesn’t lock you in…This way, if you sell your house the purchaser can decide to assume the rental or can choose his own…If you currently don’t have an energy efficient tank, get one and start saving some money.
You may be right about the lifespan but keep in mind the ones sold at Home Depot etc are mass produced in Asia and typically aren’t built to last…While the ones you rent from licensed distributors are far more durable…
Currently renting a tank that is 25 years old. I am looking to buy but am being told I have to buy a mixing valve (scald guard) by code. Has anyone replaced theirs recently and had the same experience?
[...] Michael James grapples with a rent-versus-buy decision for his hot water heater. Years ago, I decided that it makes much more sense for us to just buy the water heater outright as well. [...]
[...] Michael James grapples with a rent-versus-buy decision for his hot water heater. Years ago, I decided that it makes much more sense for us to just buy the water heater outright as well. [...]