Direct expansion solar assisted heat pump systems (DX-SAHP) have been widely used in many applications including water heating. In the DX-SAHP systems the solar collector and the heat pump evaporator are integrated into a single unit in order to transfer the solar energy to the refrigerant. The present work is aimed at studying the use of the DX-SAHP for low temperature water heating applications. The novel aspect of this paper involves a detailed long-term thermo-economic analysis of the energy conservation potential and economic viability of these systems. The thermal performance is simulated using a computer program that incorporates location dependent radiation, collector, economic, heat pump and load data. The economic analysis is performed using the life cycle cost (LCC) method. Results indicate that the DX-SAHP water heaters systems when compared to the conventional electrical water heaters are both economical as well as energy conserving. The analysis also reveals that the minimum value of the system life cycle cost is achieved at optimal values of the solar collector area as well as the compressor displacement capacity. Since the cost of SAHP system presents a barrier to mass scale commercialization, the results of the present study indicating that the SAHP life cycle cost can be minimized by optimizing the collector area would certainly be helpful in lowering, if not eliminating, the economic barrier to these systems. Also, at load temperatures higher than 70 degrees C, the performance of the single stage heat pump degrades to the extent that its cost and efficiency advantages over the electric only system are lost. (C) 2013 Elsevier Ltd. All rights reserved.