Since I know many readers have little time, here is the quick a bullet-point style list of the advantage and disadvantages of typical gas hot water tankless and tank heaters, including the newer hybrid style.

Tank Advantages
↑ Steady temperature
↑ Ability to meet small bulk demands
↑ Easily replaced with another tank (easy retrofit)

Tank Disadvantages
↓ Very inefficient (typical energy factor = 0.6. That is, 40 cents out of every one dollar goes to waste and into our air.)
↓ Limited amount of hot water
↓ If leaking, it could flood the area or basement
↓ Large size
↓ Water wastage waiting for hot water to get to faucet

Tankless Advantages
↑ Compact
↑ Unlimited hot water
↑ Longer life
↑ Generally more efficient (Energy factor of 0.82 to 0.99)

Tankless Disadvantages
↓ Fluctuating temperatures on some models
↓ Needs a minimum flow to activate. For example, if you want just a trickle flow rate, the heater may not activate.
↓ Cold water sandwich (When flow stops and starts you may feel a slug of cold water.)
↓ For whole house gas heaters, larger gas line requirement
↓ For whole house electric heaters, significant electrical capacity required (amperage, voltage, wire gauge)

Hybrid Water Heater Advantages
↑ All of the above tankless heater advantages, plus
↑ High efficiency (energy factor of 0.94)
↑ Stable temperatures
↑ Zero flow activation
↑ No cold water sandwich
↑ Eliminates waiting for hot water to get to faucet via built in pump and learning logic

Hybrid Water Heater Disadvantages
↓ More expensive than either tank or tankless heaters

For those of you who have a little more time, here is a discussion of the above points.

Tankless hot water heaters have three main advantages: energy savings, space savings, and ability to install very close to your point of use, so that you get hot water with no delay.

Most people have heard that tankless heaters save money. It is true that they save energy costs, even over a higher efficiency, power vented tank style of water heater.

The main area of energy loss with tank style water heaters is heat loss. Put your hand on the side of your water heater. It is mildly warm, so it is not losing heat there. The heater loses heat from the draft of air rising up through the center of the water heater and out the chimney. Just carefully touch the flue pipe of your water heater when the gas or electric burner is not operating. It may be much warmer, even very hot. That is where the heat loss is. A tankless water heater does not run for a long enough period to lose any significant amount of heat.

Replacing a hot water tank with another one is less expensive than installing a new tankless heater. All the existing connections are there. Just order it and install it in the same spot.

Compared to tank hot water heaters, tankless can be significantly more expensive both for the unit and for installation. On the other hand, hot water tanks have an increased risk of tank leakage. Over the years, how many people do you know or have you heard that had their basement flooded because of a busted hot water tank valve or just plain rust? Probably a few. Tankless has less of a possibility for breakdown.

Tankless water heaters have another benefit for homes, condos and apartments where space is a premium. They can be mounted on a wall, virtually anywhere in a home, and take up much less space than a regular tank water heater. If you need more real estate in your mechanical room, a tankless water heater is your best bet.

In commercial applications, tankless water heaters have applications where they can run longer and be installed in modular systems, for example multiple smaller heaters instead of one big water heater. That can provide redundancy. Also each heater at each point of use can accurately match the specific hot water requirements of that point of use.

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