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The Basics > Life-Cycle Cost Analysis

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What you'll find on this page: Tankless water heaters, tank-type heaters, hybrids, power-vents, condensing heaters. Many choices. How do you tell which will actually save you money? Larry Weingarten, co-author of the Water Heater Workbook tells how.

What does a water heater really cost, and how do you compare different models? The question might be best answered by bringing up life-cycle cost. If the unit is claimed to last twenty years, add up all costs over that time including equipment, installation, energy and maintenance. Divide by twenty to get the yearly cost. Do the same for whatever other options you're considering.

You can get more precise figuring energy and labor cost increases and find a break-even date. Some equipment never does break even.

In life-cycle cost analysis, the costs are often discounted to the present before summing. Discounting is to account for the time-value of money. The idea is that the same cost this year hurts more than the same cost several years out. Alternatively, you could think of the present value as the total amount of money you'd need in the bank today to pay for the whole life of the project. Future operating costs are paid in part by the interest on the money you've set aside to pay them with.

-- Larry Weingarten