Tank-less water heaters are basically “on demand” water heaters that heat up water “as needed”, as apposed to a tank water heater that continuously keeps the water in the tank at a certain temperature all the time. The idea is that energy is wasted in keeping hot water “hot” when it’s not needed.
Since there is no holding tank, tank-less water heaters basically heat the water to the needed temperature as the water is pushed through heating elements in the unit at the rate of 2 to 5 GPM or Gallons Per Minute.
Which one to buy depends on what your needs are. For example: You can buy the larger GPM heater for, lets say, a home with 2 baths, kitchen and laundry room or you can go with “zone” placement for larger homes which basically divides the home in sections whereby you would place a heater to heat water for those areas.
For homes that use 41 gallons or less of hot water daily, tank-less water heaters can be 24% to 34% more energy efficient than conventional storage tank water heaters. They can be 8% to 14% more energy efficient for homes that use a lot of hot water, around 86 gallons per day. You can achieve an even greater energy savings of 27% to 50% if you install a tank-less water heater at each hot water outlet.