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Should I Buy Refurbished or Preowned?

About a month ago I was playing Halo with a few friends on XBox Live. About ten minutes in, the image on the screen starts looking strange. There are odd lines and dots throughout, bizarre contrast in certain regions, and eventually the game became unplayable. I figured perhaps, like every other Microsoft product in the world, a restart was in order. When I turned it back on, I was greeted with an Error E74 and a red ring. Since I was outside the three year warranty, I was out of luck.

Now I had the option of buying a brand new XBox 360, buying a refurbished XBox 360, or simply going with a preowned unit. The price points for the refurbished (~$130) and preowned (~$160) were similar, but a brand new XBox 360 cost somewhere north of $300. I could’ve sent my XBox back to Microsoft for repairs for $99 plus shipping, so I figured I could make use of a Best Buy gift card and buy a refurbished XBox for $130 (which is what I eventually did).

The question I have is something I’ve thought about for a while – is it better to buy something that was preowned and suffered no problems or buy something that was refurbished?
Refurbished simply means that a component or a part within the item had failed or was broken and was repaired or replaced. In XBoxes, which have had known hardware problems, there are various causes for “red rings of death” but in the end Microsoft just replaces some parts and sends back the unit. There are a litany of things that can go wrong and many of the earlier units were ticking time bombs just waiting to have catastrophic failures. That said, refurbished means that any faulty parts have been replaced (hopefully).

I look at it this way – if every part within the device has a useful lifespan, before it fails, a refurbished unit contains a few parts that have had their clocks reset. All things being equal, it should be hardier than the same device without refurbishment. That’s why I thought going with refurbished was better than preowned.

Do you prefer refurbished or preowned?