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I bought a new water heater yesterday and paid $1300.00 including plumbing upgrades and taxes. I went with the best quality the company suggested because he said all water heaters are breaking down every 4 or 5 years as my Sears model did. I was going to go with a tankless water heater but the cost was 3 times as much. So do I recieve a slam or is this ok.

Because I live Richmond BC I don't care about heat so I probably can stay with my 1958 furnace since I enjoy a temperature of 54 degrees F.
You needed a new water heater anyway, and if you are paying someone to install it there is a significant labour portion to the cost. You are generally wise to go with the better quality, because you at least delay re-paying the installation cost. "4 to 5 years" life expectancy seems a low average, but this will vary with local water quality.

Economics of tankless water heaters is a subject of continuing debate. Their instantaneous efficiency is not that great compared to conventional heaters, but their AFUE looks better because there is little or no standby loss. But in most of Canada the standby heat loss is not really wasted, because it is helping to heat the house most of the year. This is not so beneficial in the BC Banana Belt, but even there I would imagine you don't mind having a little "waste" heat added to your home 8 months of the year. Certainly if cost is 3X that of a conventional water heater you are not likely to recover it within the lifetime of the heater.

Regarding your furnace, it's going to pack it in one day. Because of your location economics may not justify early replacement with a more efficient model. But there is news on the energy efficiency front that may prompt you to make an early replacment. When oil & gas prices went through the roof a short while back, Natural Resources Canada passed an amendment to their Energy Efficiency Regulations that will require all new furnaces to have an AFUE of 90% or better as of December 31, 2009. I believe BC has passed a similar requirement regarding any retrofit installations made after December 31, 2009. High-efficiency condensing furnaces are considerably more expensive than the currently permitted mid-efficiency (80%) furnaces, and wil remain that way until the mid-effciency option is completley removed from the market. And Richmond BC is one of the areas in the country where the payback time for a high-efficiency furnace will be longest. It might pay you to buy a buy a mid-efficiency before the phase-out deadline to delay having to upgrade to high efficiency for 10 years or so.
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