Part 3 of the Asset Lifecycle and Total Cost of Ownership series

Equipment becomes too expensive to repair when the expected future cost and operational risk of keeping it exceed the cost and benefit of the best available alternative.

Part 1 explained the asset lifecycle, while Part 2 showed how to calculate the real cost of downtime. This article brings those measures together to help South African businesses identify when repeated repairs are no longer commercially sensible.

What is the maintenance cost curve?

The maintenance cost curve shows how the cost of keeping an asset productive can change over its working life. The exact shape varies by asset, workload, operating conditions, maintenance quality and parts availability.

Maintenance costs often move through three broad stages:

• Early life: commissioning issues may occur, but warranties can limit some repair costs.
• Stable operating life: planned servicing and component replacement are more predictable.
• Later life: failures may become more frequent, repair times may increase and parts or technical support may become harder to obtain.

Not every older asset becomes uneconomical, and age alone is not evidence that replacement is required. The decision should be based on cost, availability, productivity, safety, support and business risk.

Why should maintenance cost be measured per operating hour?

Maintenance cost per operating hour shows whether an asset is becoming more expensive to use after allowing for changes in workload.

A raw annual repair figure can mislead. If an asset worked fewer hours this year, a similar maintenance bill represents a higher cost for each productive hour. If it worked more hours, a higher total maintenance bill may still reflect stable unit economics.

A practical measure is:

Maintenance cost per operating hour = maintenance and repair costs / productive operating hours

For some businesses, cost per unit of output, kilometre, scan, transaction or production cycle will be more meaningful. Use a denominator linked to how the asset creates value.

What costs should be included in a repair-or-replace assessment?

A repair-or-replace assessment should include all future costs that differ between keeping the current asset and moving to an alternative.

For the existing asset, consider:

• forecast maintenance, parts and technician costs;
• expected downtime and the contribution margin at risk;
• emergency rental, outsourcing, overtime and recovery costs;
• energy, consumables and other operating costs;
• insurance, licensing, compliance and support costs;
• reduced capacity, quality or compatibility; and
• expected resale, trade-in or disposal value.

For the replacement option, consider:

• purchase price, deposit, finance costs or rental payments;
• installation, integration, delivery and commissioning;
• training and temporary disruption during the changeover;
• maintenance, warranty and support terms;
• expected operating efficiency and productive capacity;
• contract term, return conditions and end-of-term options; and
• expected residual or disposal value where relevant.

Use the same analysis period and operating requirement for every option. Comparing one repair invoice with the full purchase price of a replacement will bias the decision towards another repair.

How do you identify the repair-or-replace crossover point?

The crossover point is reached when keeping the current asset is expected to cost more, or create greater unacceptable risk, than the best feasible alternative over the same period.

Use this five-step process:

1. Measure the recent cost trend

Review at least the available maintenance history, operating hours, failure frequency and downtime cost. A longer record is useful, but poor data should not create false precision.

2. Forecast the keep option

Estimate the cost and availability of the current asset over a realistic forward period. Include known major services, likely component replacements, support limitations and downtime exposure.

3. Price feasible alternatives

Obtain current costs for replacement, refurbishment, redeployment, short-term rental, operating rental or another operational solution. Exclude options that cannot meet capacity, safety or compliance requirements.

4. Compare costs on a common basis

Compare the alternatives using an equivalent annual cost, present value or cost per unit of productive output. The calculation should recognise timing: a rand paid today is not directly equal to a rand expected several years from now.

5. Test the decision against uncertainty

Run more than one scenario for failure frequency, downtime cost, utilisation, residual value and finance cost. If a small change reverses the result, the decision is sensitive and may require stronger data or a lower-risk option.

What warning signs suggest an asset needs formal review?

An asset needs formal review when its cost, reliability or support position shows a sustained change rather than a single isolated repair.

• Maintenance cost per operating hour is rising over several review periods.
• Failures are becoming more frequent or take longer to repair.
• Critical parts, technicians or manufacturer support are becoming difficult to obtain.
• Downtime is affecting production, safety, customer commitments or compliance.
• The asset can no longer deliver the required output, accuracy, security or compatibility.
• Emergency repairs and workarounds are becoming normal operating practice.
• A major repair would cost a significant portion of a suitable replacement while leaving the business with an ageing asset.
• The asset’s remaining useful life no longer matches the expected business requirement.

These are review triggers, not automatic replacement rules. A critical asset may justify earlier replacement, while a non-critical asset with cheap parts and easy backup access may remain economical for longer.

Why should past repair costs be excluded from the decision?

Past repair costs should be excluded because they cannot be recovered and do not change the future cost of keeping or replacing the asset.

This is the sunk cost problem. A business may feel compelled to keep an asset because it has already spent heavily on repairs. The relevant comparison starts today: what will each feasible option cost and deliver from this point forward?

Historical costs still have one useful role. They reveal trends in reliability, parts consumption and downtime, which can improve the forecast. They should inform the decision, not justify further spending simply because the money has already been spent.

Is the cheapest option always the right option?

No. The lowest calculated cost may not be the best option if it cannot meet the business’s capacity, safety, compliance or continuity requirements.

A strong decision separates two tests:

• Technical and operational fit: can the option perform the required work at an acceptable level of risk?
• Commercial value: among the feasible options, which has the best expected cost and cash-flow impact?

This prevents a low-cost but unreliable option from winning the analysis and avoids paying for capacity or features the business does not need.

How do buying, financing and renting affect maintenance risk?

The funding method affects cash flow and asset ownership, but maintenance risk depends on the equipment, supplier support and contract terms.

Buying or financing may give the business greater control over the asset and its useful life, while leaving it responsible for future repairs, support and disposal. An operating rental can align payments with a planned use period and support a defined refresh or return cycle.

Rental does not automatically transfer maintenance, downtime or replacement risk to the funder. Check warranties, service levels, damage responsibilities, insurance, replacement equipment, return conditions and end-of-term options in the relevant agreements.

RentWorks Africa structures equipment finance and operating rental solutions across IT, medical, yellow metal, fleet and specialised assets. Finance remains subject to approval where applicable.

What does current lifecycle-cost guidance recommend?

Current lifecycle-cost guidance recommends comparing feasible alternatives across a defined study period and including investment, operating, maintenance, repair, replacement and residual-value effects where relevant.

The 2025 NIST Life Cycle Costing Manual also highlights the need to account for uncertainty and for costs or benefits that are difficult to value. Its methodology was developed for facilities and energy projects, but NIST states that the underlying economic approach is generic enough to support private-sector lifecycle analysis.

What will Part 4 cover?

Part 4 will combine asset condition, downtime, maintenance cost, operational criticality and funding options into a practical framework for deciding whether to hold, repair, refurbish, replace or rent ageing equipment.

Frequently asked questions about repairing or replacing equipment

When is equipment no longer worth repairing?

Equipment is no longer worth repairing when the expected future cost and risk of keeping it exceed the best feasible alternative over the same period.

What is maintenance cost per operating hour?

Maintenance cost per operating hour is total maintenance and repair expenditure divided by productive operating hours. It helps reveal whether the asset is becoming more expensive after allowing for changes in use.

Should equipment be replaced based on age?

No. Age should trigger a review, not an automatic replacement. Condition, maintenance trend, downtime, support, productivity, safety and operational need matter more.

Should past repair costs influence the replacement decision?

Past costs can show reliability trends, but they should not justify keeping an uneconomical asset. The commercial decision should compare future costs and benefits from today.

Does an operating rental include maintenance and replacement?

Not automatically. Maintenance, support response and replacement equipment depend on the supplier, maintenance and rental agreements. Confirm the terms before relying on them.

Stop judging repairs one invoice at a time

If maintenance costs and downtime are rising, assess the full pattern before approving the next repair. Compare the future cost and operational risk of keeping the asset with replacement, refurbishment and rental alternatives on the same basis.

Speak to RentWorks Africa about an equipment finance or operating rental structure aligned with the asset’s expected useful life, replacement cycle and your cash-flow priorities. We can structure the funding; your business should confirm the equipment specification, maintenance plan and service obligations before deciding.