Nothing diminishes anxiety faster than action.

~Walter Anderson, The Confidence Course, 1997

When we had our home built 7 years ago, we went with a rental for our hot water heater. I realize now that this is not the norm everywhere, although it seems to be the route most people here in Ontario choose. It seemed, at the time, like a good call.

Renting a hot water tank means that your up-front costs are zero, and you just pay a monthly rental fee of $15 – $30. Service is covered for as long as you rent the tank, so you don't have to worry about unexpected expenses. A couple of years ago, a sensor went on our hot water heater. A technician showed up the same day, fixed the problem, and we had hot water again pretty quickly. Can't you just hear a giant “but” coming?

The Water Heater Vendetta Is Born . . .

When we moved into our new home at the end of June, 2003, our hot water heater rental was a little less than $19/month. Over the years, however, the rental company regularly raised our rates. Each time I sat down to draft our new annual budget, I had to bump up that water heater rental amount a little more. I grumbled like a grumpy old man, but did nothing about it.

I'm not sure what the reason for consistently raising our rates might have been, but the reality is that we now had a 7-year-old water heater that was costing us almost 40% more than it did when it was brand new. In March of this year, our rate went from $23.45/month to $24.27/month. This month, they raised the rate again to $26.11.

That was the last straw. The simmering anxiety/annoyance we had been feeling for a few years now boiled over and Mr. Cents and I decided that enough was enough. Mr. Cents did a bunch of research that same weekend on what it would cost us to buy a new hot water heater and get out of that money trap once and for all.

Hot Water Heater Math

I always say that doing the math is one of the keys to good personal finance habits. A few minutes with a pencil, paper and calculator have been instrumental in some of our best financial decisions. Many times, just getting started is a lot harder than actually doing the work.

Mr. Cents spoke to a very helpful associate at Home Depot. They chose a 189L tank with a 6-year warranty on parts and a life expectancy of 6-9 years. It's a little smaller than our current tank, but it's supposed to be suitable for a 2500 square foot home. (Ours is about 2200 square feet.) It's also supposed to be more efficient.

Here's what the math looked like:

Water Heater:   $953.72

Accessories:       $105.88

Installation:       $0

Return Fee:        $40

TOTAL COST:  $1099.60

It would have cost about $150 to have the water heater installed, but Mr. Cents decided to do it himself, so that saved us some money. He tells me it's not that hard to do, but I would say you have to be pretty handy to pull it off. I'm not sure what the opposite of handy is, but that's me. So I would have been happily paying the $150 if not for my husband. (The “accessories” included pipe elbows, couplings, a valve that broke, and a couple of patio stones on which to set the new tank.)

I should mention that renters do have the option of calling the company and buying out the rental. That would have cost us $770 – for a 7-year-old tank. Really?

The bottom line is that the up-front cost of the new hot water tank represents about 42 months of rent if you include the $40 they are charging us to take back their old tank. That's about 3 and a half years and it suits us fine. We used some money from our savings to cover the cost, but we still have a very nice emergency cushion.

Michael James and Canadian Capitalist have written some good articles on this topic as well. If you're looking for more information, there's a decent overview at Natural Resources Canada.

One Last Poke in the Eye

So what happens to the old hot water tank? Well, of course, the rental company does not make it easy. This is another one of those “You're kidding, right?” situations.

When Mr. Cents called to find out how to do it, they tried to convince us to stay with them, but eventually outlined the following bureaucratic nightmare scenario: We need to bring the tank to a Reliance Home Comfort location during a very limited set of hours. They will give us a receipt for the return. It takes 4-6 weeks for customer service to get the paperwork. In the meantime, we will still be charged rent.

At the end of the 4-6 weeks, they will issue a final bill, which includes the $40 return fee, and a credit for the interim rent they charged. This should net out to a credit for us. In order to get that money, we need to call them and have them issue a cheque. I'm not sure how long it will take to get that cheque, but I would guess it might be the old 4-6 week thing again.

Mr. Cents installed the new hot water tank on Friday night. It took about 4 hours in total, and we were without water for about 2 hours. A round of showers on Saturday morning confirmed that the new tank is working fine. Just before I sat down to write this, I cathartically removed the water heater rental line from our budget. We won't miss it.

Do you rent or own your hot water heater?