The two do the same job with opposite constraints: a tank stores a fixed amount and refills slowly, and a tankless unit stores nothing and produces at a fixed rate indefinitely.
What tankless is better at
Endless hot water. It never runs out, which is the complaint that sends most households looking.
No standby loss. A tank sits hot all day whether or not anyone uses it. A tankless unit uses nothing between draws.
Space. It hangs on a wall in the footprint of a briefcase.
Service life. Fifteen to twenty years is typical against ten to fifteen for a tank, and the heat exchanger and components are serviceable rather than the appliance being disposable.
No tank to leak. A tank fails by flooding the space it stands in; a tankless unit does not.
What a tank is better at
Simultaneous demand. A tank delivers its stored volume at whatever rate the plumbing allows. A tankless unit has a maximum flow, and exceeding it means everyone's water goes lukewarm.
Cold incoming water. Tankless output falls as the temperature rise increases, so a unit adequate in Georgia may be marginal in Minnesota.
Installation cost. Far lower — usually a like-for-like swap.
Simplicity. No descaling schedule, no minimum flow rate, no cold water sandwich.
Short peaks. A household with one intense hour and little use otherwise is exactly what stored volume is for.
The installation difference
A tankless conversion is rarely a swap.
Gas supply: a whole-house unit at up to around 199,000 BTU/h is a very large gas load, frequently requiring a larger gas line and sometimes a meter upgrade.
Venting: condensing units vent in plastic through a sidewall, which means new penetrations and a condensate drain. The old flue is abandoned — with the orphaned-appliance consequence if anything else uses it.
Electrical: even gas tankless units need power for the controls and the fan.
Those three are why the installed cost is a multiple of the appliance price, and why the payback calculation frequently does not work out on running cost alone.
The quirks
Minimum flow. A tankless unit needs a certain flow to fire, so a trickle runs cold.
The cold water sandwich. Turning a tap off and on quickly delivers the cooled slug sitting in the pipe.
Wait time. Nothing is stored, so hot water starts at the unit and travels. Recirculation fixes it and adds complexity.
Where each one wins outright
Tankless: a household that keeps running out, a small dwelling where space matters, a warm climate with a low temperature rise, or a house being built where the gas and venting can be designed in.
Tank: a household with a large simultaneous peak, a cold climate, a tight budget, or a straightforward replacement with no appetite for a project.
A heat pump tank is the third option and it is frequently the best of the three on running cost, which is worth including in the comparison rather than treating this as a two-way choice.
The honest summary
Tankless solves "we run out of hot water". It does not solve "four people need hot water at once", and in a cold climate it can make that worse.
Establish which of those two the household's complaint actually is, and the decision follows.
The efficiency argument, examined
Standby loss on a modern well-insulated tank is real and modest — a few percent of annual energy use.
That is what a tankless unit eliminates, and it is a smaller number than the marketing implies. The larger efficiency difference in the whole category is between resistance electric and a heat pump tank, not between a gas tank and a gas tankless unit.
Where a household is choosing on running cost alone, that is the comparison worth running.
Two units in parallel
For a large household in a cold climate, manufacturers support installing two tankless units in parallel with a common control.
It works, it doubles the equipment cost, and it doubles the gas demand — which is frequently the point at which the gas meter upgrade becomes unavoidable. Where the arithmetic leads there, a well-sized tank is usually the cheaper answer.