The cost of operating a tankless water heater is generally lower than a traditional tank water heater. Tankless models heat water on demand, eliminating the energy waste associated with maintaining a tank of hot water. This efficiency can lead to energy savings of 24-34% for households using less than 41 gallons of hot water daily. However, tankless units have higher upfront costs and installation expenses. Over time, the energy savings can offset these initial costs, making tankless water heaters more cost-effective in the long run.