Comments on: BVC #15: Repair or Replace Rule of Thumb

By: Damon Day

Damon Day — Sat, 27 Jun 2009 06:49:13 +0000

This post reminded me of all of these extended warranties the sales people push on us these days. I mean, if I am going to pay $1,000 for a TV, do I really need to pay another $400 to insure the stupid thing will work for more than 3 years?

As far as replacing something for me it always comes down to the cost and how much more improved the new model is. For instance, I paid $1400 for a 48″ rear projection TV (on sale) back in 1999. Sometime in 2003 the picture went out. I decided to have a TV guy come to the house, fixed it and charged me 75 bucks. Much cheaper than a new similar sized LCD or plasma ($5,000)back then.

However last year the TV started to get fuzzy every once in awhile to where I had to whack it on the side to clear up. Checked out the deals and got me a brand new panasonic 50″ plasma for only $899.

Then I sold the old TV at a garage sale for $100 bucks. So I didn’t do to bad, I got 10 years of use out of it.

By: somekidfromfl

somekidfromfl — Tue, 23 Jun 2009 00:11:05 +0000

Hey Jim,

Im trying to figure out how to apply this to whether or not to fix my car that literally just broke down.

Its a 99 Corolla that I pretty much only use to get to and from work. But truth be told, and this might change everything, I dont live THAT far from work that I couldnt bus or even walk on some days.

I bought the car about 8 months ago for 1300. In addition to 150k miles on its in bad shape physically and mechanically so I dont see it being sold for the price I bought it. I figure I can get maybe…I dunno, about $500 if I sell it.

I dont know yet what repairs it will need but I estimate its an alternator problem, so Im ready for them to tell me about $200 – $400 total.

Whatdya think…repair or replace?

By: Funny about Money

Funny about Money — Sat, 20 Jun 2009 17:07:01 +0000

One variable you’re not factoring into the calculation is inflation. After six years the $100 coffeemaker will cost more like $120 — or more, since makers of these devices drive up the price by adding new features.

@ Adam: Get a new pair of glasses, yuh poor guy! I didn’t have any problem reading the whiteboard, and I’m an old bat who needs bifocals.

And I thought your presentation was pretty good, Jim: you’re getting better at this with practice.

By: Jim

Jim — Fri, 19 Jun 2009 21:03:00 +0000

Repair or replace…. I find that repair is possible in most cases. I am always curious about why something failed in the first place. My most recent repair was for a magnetic switch on a toro riding mower. I could replace the switch for $180 myself, but I took it apart and found that it was nothing more than something I could pick up at nearly any electronics store for $4. In several cases I have found that just taking it apart cleaning everything and putting it back together does the job… It worked with an power window regulator and with a Toshiba DLP TV. So, my advice is, find out why it failed. You’ll learn something and might also find out that the repair is cheaper than you thought.

By: Jim

Jim — Fri, 19 Jun 2009 11:50:48 +0000

I am also partly to blame, I am probably not as analytical in my calculations for cars as I am with coffeemakers

By: Ted

Ted — Fri, 19 Jun 2009 06:27:10 +0000

You are totally right about me making a blanket statement, busted! I was thinking about consumer items like coffemakers/electronics not big ticket items like cars (or homes). Imagine if a neighbor kid broke a window in my house, replacing the house… Though in some sense having a car (or house) is open ended in how long it will last. So maybe my rule of thumb has an element of “Do I expect to have this thing in 10 years if I repair it?”. Still no numbers though…

By: Jim

Jim — Thu, 18 Jun 2009 21:39:37 +0000

At some point there’s a cost benefit analysis being done, it just happens that your repair abilities make the cost much lower than someone else, right? You certainly wouldn’t repair a $100 item if it required you to replace a $50 part, if you only had a year left right?

By not assigning numbers to the question, aren’t you just making gut decisions? I mean you make a blanket statement that it’s hard to make any case for repair, what if it’s a $1 part on a car?

I’m not trying to pick a fight here, just saying that your rule of thumb would be a bad one for me, just as mine is a bad one for you. So life goes

By: Ted

Ted — Thu, 18 Jun 2009 21:00:54 +0000

I don’t think your rule of thumb works for any number of years, as long as you are counting by dollars per year.

My rule of thumb doesn’t work for most people. I’m pretty handy, so if I can fix it myself, I do, if I can’t, I replace it. Most manufactured goods are so cheap now that repairs are cost prohibitive. Add to that the added costs of taking the item to be repaired and picking it up when its done and I think it is hard to make any case for repair.

By: Jim

Jim — Thu, 18 Jun 2009 20:37:24 +0000

That’s an interesting way to think about it. My rule doesn’t work if it fails after 2 years, probably because I’ve never run into that problem?

Do you have a rule of thumb that you like to use?

By: Ted

Ted — Thu, 18 Jun 2009 20:35:31 +0000

I don’t think this is a good rule of thumb. In the repair case you are basically paying $14 per year ($100+$40, lasting 10 years). In the replace case you are paying $12.50 per year ($100+$100, lasting 16 years). Much better apples to apples comparison than adding a “replace” on the end of the “repair” to extend it. Does your rule of thumb work if it fails after 2 years? after 8? Two years would be $18 per year for repair and $16.67 per year for replace. Eight years would be $12 per year for repair and $11.11 for replace. Nope, bad rule of thumb.

By: Jim

Jim — Thu, 18 Jun 2009 19:01:10 +0000

I agree with you and I merely framed the discussion incorrectly, I should’ve talked about the remaining years of useful life in terms of the replacement unit, not the one I already owned.

This idea was something I came up with independently. I’m sorry I could meet your expectations of a personal finance blog and hope I’m able to do better next time.

By: ian

ian — Thu, 18 Jun 2009 18:31:43 +0000

The math you use to come to your conclusions utilizes bad assumptions and understanding of cost. Once you buy the coffeemaker, you spent $100 – not $10 per month. You hoped for $10/month but it didn’t happen. Once the coffeemaker broke the money was gone. You need only consider the cost of a repair & the cost of the new machine.
Have you done any research on this or did you come up with your ideas independently? I look to your articles as a reference to facts and advice, this rule-of-thumb that you developed in 20 minutes is not what i hope for in a personal finance blog.

By: Jim

Jim — Thu, 18 Jun 2009 16:34:11 +0000

Thanks for the feedback Adam, I didn’t realize the whiteboard was that difficult to read or that I rambled all that much. I’ll try to improve it for next time.

By: Adam

Adam — Thu, 18 Jun 2009 16:31:00 +0000

Please, please, please practice your speech before your video. This is really rambling and does’t offer 6:30minutes of information. Really poor.

Also – why use a whiteboard if you write so small your viewers can’t read anything?!?

Hope your next video is much better than this.

By: Kevin at OutOfYourRut

Kevin at OutOfYourRut — Thu, 18 Jun 2009 16:25:17 +0000

It might matter what the item is and how much it costs. On a coffee maker at $100, if you only got six years out of it, it would probably be better to ditch it in favor of a new one if for no other reason than finding anyone who repairs smaller gadgets is tough.

On a big item like a car it’s complicated by the fact that replacing the vehicle you purchased six years ago for $20,000 will probably cost something well north of $25,000. I’d lean toward repair as a way of avoiding the debt attached to the replacement.

Culturally, in America we have an orientation toward throw away and replace, but if you look at the immigrant population you see a pronounced retain and repair habit. Our culture could stand a shift in that direction.

One thing we all have in our favor on the repair side is that given the state of the economy there’s no shortage of people available to fix what ever’s broken. We should be able to use that to some advantage.

Jim, you’re a natural teacher; you present well on the video…