Jayco and Tiffin have offered On demand as an option for about 3 years. From what I have seen and tried to fix, I would NEVER have one in an RV. They are a constant source of complaints by my customers. Yes, incoming water temp does affect the output temp. The amount of volume running thru the heater also affects the output temp. A CONSTANT complaint is uneven hot water output from scalding to then too cold in a manner of seconds. We do not option them anymore unless a customer requests one on a Order for a new RV. WE also advise them of the problems, and then let them make the decision. Doug