Short answerIn Southeast Michigan a tankless water heater must raise 40°F winter groundwater to 120°F, an 80-degree rise that cuts a typical unit to roughly 4 to 5 gallons per minute, enough for one shower and a sink. A 40- or 50-gallon tank is cheaper to install and simpler to repair; tankless saves space and standby loss but needs a larger gas line, sidewall venting and yearly descaling.
How each one works
A storage tank water heater, the 40- or 50-gallon cylinder in nearly every Michigan basement, keeps a reservoir of water at 120°F around the clock. A gas burner underneath or electric elements inside reheat it as it is used and as it loses heat through the tank walls. Atmospheric gas tanks vent up a metal flue into a chimney; power-vent tanks use a fan to push exhaust out a PVC pipe through the side wall.
A tankless water heater has no reservoir. When a hot tap opens, a flow sensor fires a burner rated at 150,000 to 199,000 BTU, water passes through a heat exchanger, and it leaves at setpoint for as long as the tap is open. Nothing is stored and nothing is kept warm, which is the whole efficiency argument. Condensing tankless models hit around 0.95 UEF; a standard atmospheric gas tank runs about 0.60 to 0.65 UEF.
The number that decides it: temperature rise
Tankless output is rated in gallons per minute at a given temperature rise, and the marketing numbers use a mild rise. Southeast Michigan groundwater coming through the main in February is 38 to 45°F. To deliver 120°F, the heater has to add roughly 75 to 80 degrees. A unit advertised at 9 or 10 GPM is usually rated at a 35-degree rise; at an 80-degree rise the same unit delivers about 4 to 5 GPM. A shower at 2 GPM plus a kitchen faucet at 1.5 GPM is fine. Two showers plus a washing machine filling is not, and the second shower goes lukewarm. In July, with incoming water in the 60s, the same unit does 7 or 8 GPM and everyone is happy, which is why people who tested a tankless at a summer cottage are surprised by it in a Canton two-bath colonial in January.
A tank does not care about incoming temperature in the same way. A 50-gallon gas tank delivers its first 40-odd gallons at full temperature regardless of the season, then recovers at 30 to 40 gallons per hour. The limit is total hot water in a burst, not flow.
The gas line and the venting
A 40-gallon atmospheric tank burns about 40,000 BTU. A tankless burns up to 199,000 BTU, five times as much, for short periods. The 1/2-inch gas line that fed the old tank in a 1960s Westland ranch cannot carry that, and many homes need a 3/4-inch or 1-inch run from the meter and sometimes a meter upgrade from DTE. That is a plumbing job on top of the water heater, and it is the most common reason a tankless quote comes in far above what the homeowner expected.
Venting is the second one. Tankless units vent through stainless or PVC out a side wall; they cannot share the chimney with the furnace. If the old tank was an atmospheric unit in a masonry chimney alongside an 80% furnace, removing it can leave the furnace orphaned in a flue that is now too large, which may require a liner. In a 1920s Ann Arbor two-story that is a real cost. In a 2005 Pittsfield subdivision house with a 90% furnace already venting through PVC and a rim joist handy, it is simple.
Electrical: a tankless needs a 120-volt outlet for its controls and fan, and it does not heat water during a DTE outage. Neither does a power-vent tank. An atmospheric tank with a standing pilot keeps working, which is a point in its favor during the ice-storm outages that hit western Wayne County.
Hard water and maintenance
Ypsilanti, Ann Arbor and most of Washtenaw County have moderately hard water, in the range where scale forms steadily. In a tank it settles to the bottom as sediment and is flushed out once a year; neglect it and the tank rumbles and dies early, which water heater maintenance, flush and anode explains. In a tankless unit the scale forms inside the narrow passages of the heat exchanger, where it cannot settle out. Manufacturers call for a vinegar or descaler flush through isolation valves every year, every six months on well water in the rural townships. Skip it and the unit throws error codes, loses output and eventually needs an exchanger. A water softener upstream changes this picture substantially and is worth the conversation if you are going tankless.
Tank water heaters have one wear part that matters, the anode rod, and a handful of simple components: thermocouple, gas valve, elements. Tankless units have a flow sensor, a fan, an ignition module, a circuit board and a heat exchanger, and most parts are brand-specific.
Lifespan and repair exposure. A 40- or 50-gallon gas tank in Southeast Michigan lasts 10 to 15 years, less if it is never flushed, and when it fails it leaks and gets replaced; there is nothing to repair on a rusted tank. A tankless unit, descaled on schedule, is expected to run 20 years or more and is repairable along the way, but the repairs are electronic and the parts come from the manufacturer. Over 20 years, a homeowner might buy two tanks or one tankless plus a couple of parts. Water heater lifespan and replacement signs goes into what ends each type.
What they cost, in market terms
For typical market pricing in Washtenaw and Wayne County, a like-for-like 40- or 50-gallon atmospheric gas tank replacement generally runs in the low-to-mid four figures installed, with power-vent tanks somewhat above that because of the fan and the PVC venting. A gas tankless installation, including the unit, venting, gas line upsizing where needed and isolation valves, typically lands in the mid-four-figures to around the low five figures. The gap closes when the house already has adequate gas and an easy vent path, and it widens in older houses. Federal 25C tax credits have applied to qualifying high-efficiency gas and heat pump water heaters, and DTE has offered rebates in some program years; we confirm what applies when we quote.
The third option people forget
A power-vent tank keeps the simplicity and recovery of a tank, vents through PVC like a tankless, and lets you get an atmospheric tank out of a chimney it was sharing with a furnace that has since been replaced. A heat pump (hybrid) water heater is an electric tank with a small heat pump on top that pulls heat from the basement air; in a 60-degree Michigan basement it works well, uses a third of the electricity of a standard electric tank, and qualifies for the strongest incentives, though it cools and dehumidifies the basement and needs 700 or so cubic feet of air around it. For an all-electric home in Saline or a propane home in Augusta Township, a hybrid tank is often the best answer of all.
Who should pick which
Stay with a tank if you have a working chimney shared with an 80% furnace, a 1/2-inch gas line, a family that runs two showers and a dishwasher at 7 a.m., a budget that favors the simplest install, or any wish to have hot water during an outage.
Go tankless if space is tight, you have or can add a 3/4-inch gas line and a sidewall vent, you have a softener or will maintain the descaling schedule, your household's peak demand is modest, and you plan to stay long enough for the lower standby loss and longer life to matter.
Consider a hybrid heat pump tank if the house is electric, or on propane, or you want the largest rebates and have a roomy basement.
A water heater installation estimate from us covers all three with the gas line, venting and chimney situation checked in person, because that is where the real cost difference hides. If the old tank just failed and the basement is wet, water heater leaking: what to do covers the next hour.