Although many consumers buy water heaters based on the size of the storage tank, the first-hour rating (FHR), provided on the Energy Guide label, is actually more important. The rating is a measure of how much hot water the heater will deliver during a busy hour. A larger tank doesn’t necessarily mean a higher FHR. Estimate your household’s peak-hour demand and look for a unit with an FHR in that range.
Everything else being equal, select a water heater with the highest energy factor (EF), the measure of a water heater’s efficiency. EF is based on recovery efficiency, standby losses and cycling losses. The higher the EF, the more efficient the water heater.
Whenever possible, do not install the water heater in an unheated basement. Also try to minimize the length of the pipes that must be run to your bathroom and kitchen.
Look for extended warranties and new energy-efficient designs. Many water heaters have eight- to 10-year warranties and some are warranted not to leak for as long as you own your home.