Repair or Replace Business Equipment? Compare Future Costs

This guide helps when a repair quote arrives and you are unsure whether to keep spending on the machine. Bring the service report, repair and replacement quotes, operating records and evidence for resale values. Use those records to compare the future costs of each option. The original purchase price stays outside that comparison.

Compare two complete ways of doing the work

Define the next 24 months of required service. Can the repaired machine deliver that service safely and reliably? Does the new one need electrical work, training or different consumables? Record dates, capacity and included maintenance before comparing totals.

Business.gov.au's equipment guide distinguishes ownership, payments and repair responsibilities. Use the actual quotes and service assessment to fill those details; a generic repair-versus-buy percentage cannot settle your business case.

Follow the payments and residual values

The fictional old machine cost $18,000 several years ago. That past payment is excluded. Repair costs $3,000 now; replacement costs $12,000 plus $1,000 installation, less $1,000 from selling the old machine. Neither option needs further replacement within the two-year period in the base case.

Assumptions: Fictional Australian-dollar management example. Revenue and costs exclude any recoverable GST; non-recoverable tax is included in costs. No GST entitlement or income-tax deduction is assumed for your business. Contribution is before unallocated overhead and income tax. The chart includes assumed sale proceeds at the end of year 2. No financing, separate GST flows or income-tax effects are modelled; figures are undiscounted.

Timing or item	Repair	Replace
Now: net equipment outlay	$3,000	$12,000
Year 1: operating and maintenance payments	$2,500	$1,000
Year 2: operating and maintenance payments	$2,500	$1,000
End year 2: assumed sale proceeds	−$500	−$5,000
Net payments over two years	$7,500	$9,000
Lost contribution from downtime	$1,500	$250
Payments plus lost contribution	$9,000	$9,250

Original ASBG worked example. All businesses, amounts and scenarios are fictional. The table contains the same figures as the visual.

Repair requires $1,500 less in net payments. Allowing for the modelled downtime narrows its advantage to $250. Lost contribution is the revenue forgone minus costs you avoid by not doing those sales. It is not another supplier payment and should not be added to a cash-outflow forecast as though it were one.

Test the risk that could reverse the answer

Suppose another breakdown would cost $2,000 to repair and lose another $1,000 contribution. The repair case becomes $12,000 including lost contribution, making replacement $2,750 better under that scenario. Do not call this the expected result unless there is a defensible probability for the breakdown.

Ask the technician what the quoted repair fixes, what remains worn and what evidence supports another two years of service. Get a realistic resale estimate and deduct selling costs. If keeping the old machine needs a replacement during the period, add its dated payment and residual value; otherwise you are comparing different services.

Check affordability and tax separately

Replacement needs $12,000 now even though its total comparison is close to repair. Use the equipment cash-timing worksheet to check that payment against other bills. For longer horizons or close results, ask your accountant to compare discounted cash flows as well.

Tax deductions, depreciation and GST timing are separate inputs for your accountant to establish. The worksheet makes no eligibility determination. If leasing is another option, move to the purchase-versus-lease proposal comparison.

Where to get help

Have safety and repair-life questions answered by the qualified equipment service provider, and the business case reviewed by your accountant. The pricing and profit hub connects equipment choices with capacity and contribution.