Repair, New, or Refurbished?

Question: 

Your plant has a 15-year-old conveyor motor that fails every 4 months. Each repair costs $300. A new motor costs $2,500. A refurbished motor (from a specialist) costs $1,200 with a 1-year warranty. Which path do you choose? What data would change your answer? 

Answer: 

Given: 15 years old, fails every 4 months → 3 failures/year × $300 = 900/year. New = $2,500; Refurbished = $1,200 with 1-year warranty. 

Simple payback (repair vs. refurbished): 

Current annual repair cost = $900.  
Refurbished cost $1,200.  
Payback = 1.33 years.  

After 1 year, warranty covers failures. From year 2 onward, assume refurbished failure rate is similar to current (3 failures/year) → another $900/year. Still cheaper than $2,500 for new. 

Decision: Choose refurbished motor based on current data. 

What data would change answer? 

▪ If the conveyor is a production bottleneck where downtime cost is >$500/hour → new motor (higher reliability) may be justified. 

▪ If the refurbisher's warranty excludes labor, adding $150/failure for installation → refurbished TCO rises. 

▪ If the motor is obsolete and refurbisher uses scavenged parts with unknown remaining life → avoid. 

▪ If new motor efficiency is 10% better, then electricity savings alone could favor new motor over 5+ years.