Hot Water Heater: Rent vs Own

New homebuyers often take over the rental contract of the hot water heater when they purchase a home. In general, you never think about it again. Who really spends time contemplating their water heater, as long as it’s pumping out good hot water reliably. But could we save money if we owned instead of rented? Here’s why you should stop and take a second look at renting versus buying a hot water heater.

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Our Background

When we bought our century-old house over 14 years ago, it came with two hot water heaters, both rented. With all the craziness of moving, including 3 kids under 5, we never thought much about it.

Over the years, we’ve heard more about tankless water heaters. But when I inquired about it, they said it would be a good fit for our needs. We’re a family of 6, and we have two basement rental apartments. So that’s potentially 8 showers, a dishwasher, a washing machine (although I generally wash with cold water), and so on. So we left the situation as is.

Related reading: Save money on your cable, internet and phone bill

The Tie-in with a New Furnace

This year it’s time to replace our 30+ year old boiler for our hot water radiator heating system. And our technician has told us about a newer combination product that also includes hot water heating.

Purchasing this new boiler/hot water system is not cheap, but here are the advantages:

• The old boiler is over 30 years old, and in theory reaching the end of its life, despite annual maintenance.
• A boiler failure would mean no heat, possibly for several days. Not good in a Canadian winter.
• A boiler failure could also mean a basement flood. Also not good, especially for our basement tenant. (And thus our rental income.)
• The new boiler is 96% efficient, so we will save a lot of money on heating the house.
• It also cycles on and off differently, which keeps the temperature in the house more constant (and thus more comfortable) rather than getting cool before it heats up again.
• The new system can have a separate thermostat for the basement, meaning it will keep the tenants more comfortable and they will use less supplementary electric heat. This will save us additional money.
• With a separate thermostat in the basement, we can turn down the heat upstairs overnight or set it quite low if we go on vacation, and the tenants will still be comfortable.
• The combination system means we can get rid of our two rental hot water tanks.
• Getting rid of the hot water tanks will not only save rental fees, but also the cost of heating water should go down.
• As a bonus for our tenant, he can use the space where the hot water tanks were as a large storage closet.

Our Two Hot Water Tanks

We currently rent two hot water tanks. One is gas and the other is electric. I don’t know why, that’s how they came when we bought the house.

Currently, in 2019, one rental heater costs $29.72/month and the other $13.99/month, plus HST. The total is $49.39 every month. That is nearly $600 per year!

But the price increases about every year! In 2018 the total was $47.73/month including taxes, and in 2017 it was $46.16/month.

That’s a bit perplexing – why does it cost more to rent the same equipment? The hot water heaters aren’t getting “better”. If anything, they would be deteriorating. The rental price doesn’t include the cost of running them, that would be on our electricity and gas bills.

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The Long-Term Cost of Renting

I can only access our bills online through Enercare for the past two years, so I don’t know what the rental costs were further back than that.

Let’s guess that the price has gone up about $1.50 each year, over the 14.5 years we’ve owned the house.

That means that we have paid over $7,000 for these two hot water heaters!

But What about Service?

I have to admit, I don’t know whether there is a service plan included in our two hot water tank rentals. Nothing ever broke down, in 14 years.

Purchasing a new tank includes a long-term warranty, which should suffice.

The Cost of Buying a Hot Water Heater

A quick look at Home Depot online shows a wide range of prices for hot water tanks.

Let’s say we replaced our two hot water tanks with a large capacity 60 gallon tank. That would be $590 for an electric product with 6 year warranty, or $1,060 for a gas version with 12 year warranty.

We’re paying nearly $600 per year now in rental fees for those two hot water tanks, with 15-year-old technology. I could replace them with one modern electric large capacity heater for nearly the same price! Even if we chose gas it would be paid off with less than two years of rent.

And we’ve been paying rent for these hot water heaters for over 14 years. Talk about money down the drain!

But What If I Don’t Have the Money to Buy Now?

What if you don’t have the cash lying around to buy a hot water heater outright?

I would strongly recommend not buying on a credit card and carrying a balance. Credit cards often charge interest around 20%, and that’ll eat up any savings pretty fast.

If you have another source of cheaper borrowing, such as a line of credit (LOC) or home equity line of credit (HELOC) or other bank loan, that would likely make sense.

Buying on Credit Case Study

Here’s an example of buying on credit, for a $600 hot water heater. Let’s say with tax and installation it comes to $900.

You put $900 on your line of credit, which charges 4.5% interest annually.

Each month you pay $50 towards your line of credit, which is what I am currently paying for my two rentals, so it’s no change in cash outlay.

It would take 18 months to pay off that hot water heater. After only a year and half, you fully own that water tank and no more $50 every month rental fee!

A Real Life Example

Kim Petch, writing for Maple Money, also details her experience switching from a rental hot water heater to an owned unit. The all-in cost was about $1,100, and they were replacing a 7-year-old one that was renting for $26/month.

Interestingly, the rental company offered that they could buy out their old hot water tank for $770. Why would you spend that much on old technology that is less efficient?

What Happened When I Tried to Cancel and Return the Rentals

Before our new boiler/water heater combo was delivered and installed, I called Enercare (the company our rentals are from) to tell them to cancel my contract.

I was unsure if they needed advanced notice, but I didn’t want to be on the hook for more rental charges than necessary.

I told them I wanted to cancel my two rentals and return them.

This, as it turns out, is not as simple and straightforward as it seems. It took nearly an hour on the phone.

In addition, they told me that as per the terms in my rental agreements, Enercare would pick up my electric tank for free, and there would be a $75 charge to pick up my gas tank.

WHAT?!?

Why in the world should there be a difference? Especially since they would be coming here to pick up one tank already! Moreover, we’ve paid them over $7,000 for these two heaters that were probably worth less than $1,000 new 15+ years ago. In my opinion, I had paid Enercare enough.

But the customer service rep on the phone would not budge. The only alternative would be to haul the hot water heater ourselves to the depot during their limited open hours.

How I got my $75 Back

I did not want to haul a hot water heater to their depot. And the injustice of having to pay to have them take one heater when they were already coming to pick up the other for free really smarted.

So I went to Twitter, and complained @Enercare. That got a reply to DM them, which I did.

The next day, I received an email that they could not waive the $75 fee, but they would credit my account for $75 to offset the fee.

Now I’m happy.

The Take-Away

Purchasing a hot water heater seems to be the best route to go, financially. Especially if you can pay for it outright instead of needing a loan.

If you are returning a hot water heater rental, and they want you to pay them for hauling away their own equipment (which undoubtedly they charged to bring in the first place) keep taking your complaint higher until you get satisfaction.

If you are in the market to buy a home, look into whether the hot water tanks are owned or rented when you place the offer on the house. You may or may not want to write a change into the offer. But consider how difficult it may be to get out of the rental contract afterwards. Read more first-time homebuyer advice.

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