Deciding whether to repair or replace a malfunctioning water heater starts with its age. A traditional tank-type water heater lasts about eight to 12 years. An anode rod inside the tank helps protects the interior lining by attracting corrosive particles to itself through electrolysis. Over time, the rod corrodes and can’t do its job. At that point, corrosion inside the tank will start to occur, signaling the end of the unit’s life. The most common signs of this are discolored or rust-colored water and a metallic or otherwise "off" odor or taste.
Tankless water heaters last up to 20 years, but they also cost two to three times more. Goheen charges $1,000 to replace a 50-gallon tank-style electric water heater (not including any upgrades required by building codes). Replacing a gas-powered water heater costs $1,100 (not including code upgrades).
Water heater manufacturers typically do not warranty units for longer than six years because they know that’s when they may start to malfunction or fail. A unit with a six-year warranty can usually be expected to last eight to 10 years, Goheen says. Tank leaks most often signal that a unit needs to be replaced, he says, especially if it is more than 6 to 8 years old.