Repair or replace? How to make the financial decision

Start with cost per remaining year

The cleanest way to compare is to convert both options into cost per year of service you expect to get.

A $600 repair on a water heater that will probably last three more years is about $200 a year. A $2,000 replacement with a twelve-year life is about $167 a year. On those numbers replacement wins — but only because of the life estimates, which is exactly where the honesty of this calculation lives.

The 50% rule, and where it breaks down

A widely used shortcut: if the repair costs more than half of replacement, replace it. It's a reasonable first filter, and it fails in two directions.

It says replace too eagerly on equipment that's young. A $500 repair on a $900 dishwasher that's two years old is over 50% of replacement — and still probably the right repair, because you're buying back eight more years of life.

It says repair too eagerly on equipment that's old. A $300 repair on a fifteen-year-old furnace is well under 50%, but it may buy you one winter before the next failure.

Age relative to typical lifespan matters at least as much as the ratio.

Running costs change the answer

Newer equipment often uses less energy or water, and that difference compounds over years. If a replacement genuinely saves $8 a month, that's roughly $96 a year working in its favour.

Two cautions. First, use a figure you can defend — a nameplate rating or a written estimate, not a showroom claim. Second, an efficiency gain does not by itself justify replacing something that works. Replacing a functioning system to chase savings usually costs more than it returns, because you throw away years of life you already paid for.

What the math can't tell you

Some things belong in the decision and not in the spreadsheet: whether a failure in February would be an emergency, whether you're selling in a year, whether you're tired of the thing breaking, whether a repair means finding parts for a discontinued model.

These are legitimate reasons to choose the more expensive option. They're just better decisions when you know what they cost.

A practical sequence

• Get the repair quote in writing, with what's being replaced and any warranty on the work.
• Get one replacement price for a comparable unit, installed, including disposal of the old one.
• Estimate remaining life for the repaired equipment — the technician's honest answer is usually good enough.
• Compare cost per remaining year, then add any defensible running-cost difference.
• Decide, and let the non-financial reasons win if they're worth what they cost.