After Medicanix quotes a repair, we often get asked the question “do you think I should repair my equipment or just buy a new one?” Unfortunately, we do not have a crystal ball to give our customers the yes or no answer they desire, but we can give them some solid tips and considerations to think about when deciding to replace or repair their capital equipment.
The Old vs. New
New machines obviously can be expected to last longer and have better reliability, but this can vary greatly on the abuse they are going to withstand and also the functions they perform. For example, sterilizers boil water which create a bio-film inside the autoclaves moving parts and components, no matter if it is new or old, will happen to all autoclaves and unless they are maintained. Eventually, repairs may become serious enough or start happening too frequently and it becomes a question of “Do I repair again or replace it this time?” If you can, look at the history of the item in question and how much your past repairs have cost, you then may be able to do an analysis as to whether replacing is the cheaper way to go.
The availability of replacement parts also should play a big role in your decision. As time goes by machines become antiquated and parts become scarce or expensive.
How do you calculate the real cost of replacement?
Buying new always allows you a guaranteed grace period of easiness and that not only that your item looks more up to date cosmetically, and performs better as well. If something does go wrong, there is always a warranty for a period of time.
Another consideration is that new technology, and the new item may have some new features that will help your practice run more smoothly. Can you put a dollar value on efficiency these new features offer? – try to if you can.
All that being said your analysis has to include the cost of maintenance and up keep for the new item, and if financing is a factor you must add in the interest, as only a few small medical practices are able to purchase their capital equipment completely. Take a look at the history and see if you can find a usable life cycle of the equipment, if repairs have been extended during that time you will have to add them in to the equation and find a good deprecation number.
What about the Cost of my Repair?
The cost of repairing these machines can range from a minor inconvenience to a full blown headache. When it comes to justifying the minor or major cost of repairing, consider how long the equipment might last before the next serious breakdown may come and will the repairs get more costly over time as parts go out of production? How much will the repair depreciate over how much time? Has the item been fully depreciated yet and is it owned out-right or is there still financing being paid out for it?
These are figures that have to all be built-in to the analysis in order to get a true picture. Also does the current equipment have any trade-in or resale value? Does the old equipment have any neat features that are no longer available on the new equipment being sold today? At what point, does the money spent annually on keeping the equipment going cost over against financing a new one? If you can come up with a breakeven point for complete ownership and continuing to repair the old versus buying new you will get a clearer understanding.
As you can see, there is no clear cut answer. So many factors must be considered. The analysis often comes down to the company’s cash position at the time of the equipment break down.
Here at Medicanix we like to follow a simple rule: if replacement parts will be available for the next 4 or so years, and the cost of the repair is less than 1/3 of the equipment’s replacement value, and the new equipment does not have any extra features of real value, then the repair is worth it.