budgets | Financial Crooks

When we bought our current house it came with a water heater tank rented from (then) Enbridge. Soon after the rental contract was shifted to Direct Energy. No one changed the tank though. It was ancient and getting older. Eventually we cancelled our water tank rental and had our own tank installed. Here’s why.

Ancient Water Heater Tank Struggles On

According to the information on the side of the tank, our water heater was installed by Consumers Gas in August 1991. We live in an area with hard water so goodness knows how much scale had deposited in the tank over the years. I have no reason to believe the previous owners had followed the required maintenance practice of flushing the tank regularly. (A neighbour whose tank finally failed found there was over a foot of solid scale at the bottom when the tank was cut open.)

I started hearing stories from relatives and friends of tanks of this age suddenly failing, often when the owners were away. Often their basement was damaged by flooding. Our tank is in an unfinished part of our basement with a clear short run to the floor drain but even so it made me nervous to hear.

Rent Versus Buy for a Water Heater Tank

I knew I wanted our tank replaced before anything nasty happened.

At that time, we were renting the tank for $14.93 per month (including the HST.) Yes, we were paying almost $180 a year for a tank that was almost 20 years old!

It was not necessarily going to be easy to convince Direct Energy to replace the tank because it wasn’t broken yet. If we could convince them, we knew the rental cost per month would increase.

The other option was to buy and install our own tank.

Checking Prices and Warranties

We did a bit of scouting around online looking at prices and warranties. To be honest, we could have spent more time and been more thorough. But we saw an offer that looked good and went with it.

Home Depot at that time was selling 40 gallon natural gas water heater tanks with three levels of quality. A 6-year tank, a 9-year tank and a 12-year tank. From reading reviews and consumer information, it appeared that usually the difference between tanks is the thickness of the walls and parts and the use of one or more sacrificial anodes. All of these things are intended to increase a tank’s life by slowing down how quickly it rusts out. Since we wanted a tank that could last as long as possible (since labour costs are a big part of tank replacement costs) we went with the 12-year tank. (If they’d offered a longer life we probably would have bought it.)

The warranty offered by Home Depot if you had the tank installed by their Installation Services department was great. For the 6- and 9-year tanks, the tanks and functional parts were only guaranteed for the 6 and 9 year expected life, but the labour was also covered. For the 12-year tank, the warranty covers the tank and functional parts and LABOUR not just for 12 years, but for life! Their tagline is “The last hot water heater you’ll ever buy!”

Do we realistically expect to be able to hold Home Depot to that warranty if the tank has problems in, say, 15 years? No. But it sounds great on paper! (We do have a copy of the information in writing but I suspect there is some way it can be weaseled out of.)

What this warranty really suggests to me is that the tank is probably of a reasonable quality.

Installation Is Easier for a Replacement Water Heater Tank

Our installation costs were not that high. We were replacing a natural gas water heater tank with another of the same. Due to some changes in the shape and height of tanks over the years a small amount of pipefitting adjustment was needed. However the actual gas lines were already in place, etc, which means the required work was minimal.

What Did It Cost to Replace our 40 Gallon Natural Gas Water Heater Tank?

All in, taxes, delivery, tank, installation, and removal of the old tank from the basement to the great out of doors, cost us $910.90. Probably not the best deal available but it was acceptable to us.

What Did We Do With Our Old Tank?

Believe it or not, Direct Energy wanted back the old tank! When I phoned them to cancel our rental they told us they would pick up the tank for free or we could deliver it to one of their depots. (There may be a cost now for tank pickup. Check your contract.) We opted to have them pick it up.

Ever mindful of the horror stories I read in The Star about water heaters I didn’t really relax till they picked it up about a week later. I even kept a tarpaulin over it to keep the snow off just in case. Fortunately in my case there was absolutely no problem with Direct Energy.

When Will We Payout the Water Tank?

The rental cost for our old tank was $12.99 per month plus HST, so just over $14.93 per month. At $179.26 per year the payout on the new tank would take a long time: about 5 years.

It’s important to remember though that the reason we replaced the tank was

we thought it would leak and damage our basement at any time
the rental fee for a new tank would be much higher

At the time, a new rental from Direct Energy would be about $25 per month. At that rate, the tank would payout in about 3 years.

Yes, technically I should include the value that money could have earned if invested. I didn’t. I’m mathematically lazy.

Having Control of My Water Heater Costs Appeals to Me

~~I’m a control freak~~. I enjoy feeling in control. I like knowing that no one can arbitrarily raise the cost of my water heater.

Do We Regret Buying Our Own Water Heater?

We had our water heater installed in December 2010. Two and a half years later it’s still working well. So we’ve almost paid it out. After December if it breaks and we have to pay to replace it, we’ll be no worse off than if we rented. If it doesn’t break, we will start saving money each month versus renting.

Related Reading

Is Hot Water a Matter of Life and Death? If Not, Why Are You Insuring Your Water Tank?
Budgetting for Retirement: Reduce How Much You Must Pay on a Fixed Schedule (This includes an update in March 2014 on the water heater described in this post.)

Join In
Do you own or rent a water heater? Is it a tank or a “tankless” system? Please share your views with a comment.

I find ads for water heater rentals fascinating. In particular, I believe some ads for water heater tank “insurance” or “maintenance plans” are some of the best fiction currently published today. My grandfather, though a 6th generation Canadian, lived many years without electricity and without hot running water. He didn’t die. He didn’t even suffer much. When did running hot water become a matter of life and death?

Scare Tactics to Try to Sell Water Heater Maintenance and Insurance Plans

Some companies offering these plans like to throw around some very large numbers. I believe the intention is to scare readers into purchasing their insurance or maintenance plans.

Here are some numbers from the Direct Energy Water Heater Rental Page:
Typical Water Heater Repairs
Parts and Labour Costs:

Ventor Motor $672.25
Gas Valve $697.00

Sounds impressive, right? Imagine if BOTH the motor and the valve went?!

Did you know a brand new full-price 40-gallon 12-year natural gas tank only costs $688?

Also from the Direct Energy Website, I found the cost for two plans that cover (some) repairs and maintenance to water heaters. The plans are primarily geared towards repairs and maintenance of furnace and air conditioner units. They cost $27.45-$38.45 a MONTH.

Home Emergency Insurance Solutions has a plan for only hot water heaters which includes up to $1000 to replace a unit if it cannot be fixed. This plan costs $6.99 a month.

Do You Flush Your Water Heater Tank Regularly?

If you read the service manual for your water heater it will probably say you need to flush the tank on a regular (listed) schedule. This helps to prevent the buildup of deposits of minerals from your water and rust from your tank at the bottom of the tank.

When Do Water Heater Insurance Policies Really Fail?

If you don’t follow the maintenance schedule for your water heater tank, many “insurance” policies will not cover needed repairs.

In fact, if you rent your water tank, you may also have to pay for repairs if you are not following the manual. On the Direct Energy website, the fine print says:
“Some limitations apply in the following circumstances: …if… water heater requires flushing, de-liming or other repairs from hard water conditions, or iv) where venting or piping requires cleaning, repair or replacement. “

Don’t be too sure that your policy will pay for repairs. One of our friends was told because there was calcium buildup in the tank they would have to pay themselves for replacing their rental unit, even though it was 12 years old.

How Critical is Hot Water to Your Daily Existence?

Before paying cold hard cash for hot water insurance, I’d stop and ask myself “How would I manage with no hot running water?”

Yes, we like to take showers and baths, wash our hands in warm water, wash dishes in hot water, and wash some clothes in warm.

Are any of those requirements critical though?

To wash ourselves, we can heat water and add it to cold. Pioneers did it. Pre-1800’s everyone did it. Is it a nuisance and somewhat dangerous? Yes. Is it impossible? No.

Many times in the winter we heated water in a kettle at our cottage and added it to cold water in the sink before washing the dishes. It’s a bit time consuming but it works.
Clothes can be washed at the Laundromat or a friend or relative’s house for a few days until repairs or a replacement can be completed.

Save Your Money: Don’t Insure Your Water Heater

I’d conclude that spending money to insure your water heater is unnecessary. The insurer might refuse to pay if they could claim you overlooked some type of required maintenance. If the repair is high cost, you could just get a new tank and have several to many years of reliable future service.

If you’re really worried, why not put the same $6.99 to $38.45 (taxes not included!) in a bank account ready to use for the eventual replacement of your tank? That $94.78 – $521.38 per year would add up quickly.