In weighing repair vs. replacement, consider the cost of each option, the age of the appliance, possible energy savings, and your financial position.
The freezer is making melty ice cubes. Or the dishwasher isn't getting your dishes clean. Or the washing machine has simply stopped washing. You call a repair technician, who tells you how much it will cost to fix the problem. How do you decide if the repairs are worth the cost, or if you should just replace the appliance? The answer depends on the relationship between the cost of repair and the cost of replacement, the age of your current appliance, potential energy and/or water savings with a new appliance, and your financial situation.
In the automobile insurance industry, no repairs are ever made to a vehicle in excess of seventy-five percent of the vehicle's current value. Nor does it generally make sense to pay for repairs to an appliance that total seventy-five percent or more of the cost of a new appliance that's otherwise equivalent to the old one. With seventy-five percent as a maximum, though, there may be times when repairs are lower than that threshold, but still won't pay off.
Insurance companies consider the age and condition of the vehicle when they decide whether or not to repair it, and you should do the same for your appliance. Say that the cost to repair your range is $300, and the cost of a similar new range is $600. Under the rule above, you might consider having the repair done. But what if your range is already fifteen years old? Ask the technician how long you can expect the repairs to extend the life of the appliance- presumably, no longer than the appliance's usual life span. A typical range, for instance, lasts for eighteen to twenty years. In our example, you cannot expect the repairs to last longer than three to five years, and so they are probably not worthwhile. But if a two-year-old washing machine needs $150 in repairs, the repairs are probably worthwhile. Take the cost of a new appliance and divide by the number of years it should last to find the cost per year. Then take the cost of the repairs and divide by the number of years your appliance can be expected to last after the repair. If the first number is considerably lower than the second number, consider replacing your appliance instead of having it repaired if you can afford to do so.
A further consideration, particularly relevant with refrigerators, is the cost of running a new appliance. In recent years, many appliances are being offered in more energy- and water-efficient models than in the past. Find out from your owner's manual (call the manufacturer if you have lost this) what your current appliance is expected to consume, and then find out how a new appliance compares. It might turn out, for instance, that a new washing machine would save you $15 a month on water and electricity over your old machine. Suppose that repairs would cost $100 and might extend the life of the machine for two years. If your machine would cost $600 to replace and a new one would last fifteen years, the repairs would be questionable anyway, but the operating cost savings make them definitely not advantageous. Perform the calculations described at the end of the paragraph above, but subtract the amount you can expect to save per year from the cost per year of a new appliance.
It you can't afford a new appliance, the above calculations may be moot. Will you have to borrow to buy a new appliance? Then take the cost of the interest into account in making your decision. Will it keep you from meeting your savings goals? If you buy a new appliance with money that you would otherwise have put into a tax-deferred savings plan, you will lose years or even decades of interest on that money. Even if repairs do not seem strictly worthwhile, you should consider repair over replacement if replacement will harm your financial position.
