We have a 2.5 gallon water heater under our kitchen sink that my wife had put in about 10 years ago. It's now leaking. We want to put in something that gets us hot water instantly to that sink. I don't like the current water heater because it takes up a lot of space. What's the best option at a reasonable price?
There has been a lot of improvements on the under the counter instant hot water heaters over the years. However the only thing that manufactures have not been able to figure out is how to make a gallon of water smaller. So the sizes overall have not changed that much so you are pretty much stuck with the current size that you currently have. You will find some models that may be a bit smaller then what you have. You can do this simply by searching Google for Undersink on demand water heaters.
Prices range from around $150 and go up to several hundred dollars. So you should be able to find something in your price range.
Keep an eye on efficiency ratings as well as UL approved. This will assure you that your getting something that will last as long as the one you are replacing and will provide you with reasonable hot water for a low cost.