Age is the biggest factor – most water heaters last 8-12 years. If yours is approaching or past this age and having problems, replacement is usually more cost-effective than repeated repairs.
Other clear signs include rusty or discolored water, strange noises, leaking around the base, inconsistent water temperature, or significantly higher energy bills. These indicate internal components are failing.
If you’re getting lukewarm water even on the highest setting, or your hot water runs out much faster than before, your water heater is likely near the end of its useful life.