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To Repair or Replace? That is the Question.

Follow the 50% rule and these four other rules for determining when it pays to repair an item, rather than replace it.


toll belt

My Grandpa Clyde was one of the great handymen of all time. He could repair just about anything.

Before Clyde bought something, the first thing he'd ask was whether he could get parts and supplies to repair it himself when it broke. If the answer was "no," he wouldn't buy it. If the answer was "You don't need to worry about it, Mr. Yeager. This will never break," Gramps would thank the salesman politely and walk away, rather than accuse him of being a bald-faced liar. As Grandpa Clyde was fond of saying, "Automatic means you can't fix it yourself," and he wanted nothing to do with it.

Unfortunately, times have changed since Clyde's day. We now live in a world of planned obsolescence and one in which it costs more to repair most items – if they can be repaired at all – than to replace them. That's not only costing us more, but it's a massive waste of the earth's resources. America's nearly 2,000 landfills stand as sad monuments to our throw-away culture.

But sometimes it still pays – financially, and of course environmentally – to repair rather than replace, even if you're not as handy as Clyde and have to pay someone else to repair it for you. Here are some rules of thumb about whether to repair or replace:

The 50% Rule:
Financial pundits often talk about the "50% rule" when deciding whether or not it's more cost effective to repair an item rather than replace it. The conventional wisdom was that if a repair was estimated to cost 50% or less than the amount you paid for an item, it was usually better to have it repaired. This is still a good guide to keep in mind, although many consumer products (e.g. electronics, furniture, appliances, even clothing) have continually dropped in price (in inflation adjusted dollars) in recent generations. So now, to be more accurate, the 50% rule should be based on replacement value, not original purchase price, or even on the estimated current market value or resale value of major items like automobiles. Regardless, it's simply one rule of thumb among many other considerations.

Appreciating Appreciation:
Before you decide to replace something instead of have it repaired, carefully consider whether the item you're thinking about trashing might appreciate in value over time. In the case of a well-made piece of furniture that is likely to become an antique, the choice to repair it is probably obvious. But it may not always be so apparent: When they needed repair, I wanted so badly to pitch those clunky old stereo speakers my dad passed along to me when I was a teen, and buy some trendy new (cheap) ones at Kmart. But Dad wouldn't let me; now those JBL speakers are classics and worth nearly as much as my 401-K (sadly, in that sense).

Around the House:
Well-made, older appliances may be worth the cost of repair (if you can still find parts and someone to do the work), but you need to factor in that most older appliances use considerably more energy than newer models (see energystar.gov), so in the end it's often more cost effective to replace them when they need repair. On the other hand, replacing older windows in your home (if they're still in serviceable condition) with more energy efficient ones may not be a smart investment, taking a good many years in most instances to recoup the significant upfront investment. What about the roof over your head? Investing in maintenance and even fairly major roof repairs to prolong the life of a roof – provided that it's in generally sound condition – is often more cost effective, particularly for larger roof surfaces.

Rags or Riches:
When it comes to clothing, the priority should be on taking proper care of it (don't use the clothes dryer!) to make it last rather than investing in repairing it. Because most non-designer clothing is relatively inexpensive, it's usually cheaper to buy something new once garments become threadbare. Even if you put on a few pounds, tailoring garments usually only makes financial sense with higher-end apparel items, unless you're a seamstress yourself.

Is It Plugged In?:
A friend of mine who owns an electronic repair business once told me that nearly half of all the items people bring into his shop are simply suffering from a faulty electrical cord, plug, or other connection problem, or something else with a simple fix like cleaning out an air filter or replacing a worn-out belt. If that's the case, then repairing it will save you major currency (get it?). But, if it's something more major and requires special parts, even my friend admits that most new electronics are so inexpensive that it's probably not worth the fix.

Jeff Yeager is the author of:
* The Ultimate Cheapskate's Road Map to True Riches: A Practical (and Fun) Guide to Enjoying Life More by Spending Less, and
* The Cheapskate Next Door: The Surprising Secrets of Americans Living Happily Below Their Means
* Find more of Jeff at www.UltimateCheapskate.com, Twitter and Facebook

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