This page explains how to combine a new machine's payback period with an old machine's avoidable maintenance cost to make a replace-or-maintain decision. This matters to a factory owner or a domestic brand's management team weighing a supplier's quote against the cost of keeping an ageing machine running.
Cedar & Co., the domestic brand used in this lesson, must decide whether to replace the packing equipment it has relied on since lesson 6.2, whose breakdown maintenance cost has grown well above its preventive cost. Omar, its owner, and his team weigh a new machine's payback period against what the old machine quietly costs every month it stays in service.
Without this skill, a decision-maker judges payback period from labour and downtime saving alone, ignoring that the old machine's rising breakdown cost is itself a real, avoidable cost replacement would stop. That mistake makes staying with the old machine look free, when it is not. This lesson gives you the method for combining both sides of the decision correctly.
You need: lesson 6.1's payback-period method and lesson 6.2's preventive-versus-breakdown comparison; this lesson combines both.
By the end of this lesson you can:
Not covered here: calculating a new machine's payback period from labour and downtime saving alone (lesson 6.1), comparing preventive and breakdown maintenance cost for a machine already owned (lesson 6.2), and building the maintenance schedule that produces a preventive-maintenance total (lesson 6.3).
| Term | Meaning |
|---|---|
| Payback period | The time it takes for a machine's total monthly savings to add up to its total investment cost. |
| Depreciation | Spreading a machine's purchase cost over its useful working life instead of counting it all in the year it was bought. |
| Preventive maintenance | Scheduled inspection and parts replacement done before a machine breaks down, on a fixed timetable. |
| Breakdown maintenance | Repair work done only after a machine has already stopped working, usually more costly than preventive maintenance. |
| Downtime cost | The value of production lost while a machine is stopped, whether for a scheduled visit or an unplanned breakdown. |
The decision to replace a machine compares the new machine's payback period against the old machine's avoidable cost: the amount its breakdown-maintenance cost exceeds what preventive maintenance alone would cost. If the old machine's avoidable yearly cost, added to the new machine's other savings, still gives a payback period the business considers acceptable, replacement is justified by the numbers. If not, maintaining the existing machine longer is the better-supported choice for now. Neither answer is automatically right; the calculation only shows what the numbers say, not the whole decision, since cash available and production risk still matter.
*An old machine's avoidable yearly cost must be converted to a monthly figure before it can be added to a new machine's other monthly savings. Dividing by 12 turns lesson 6.2's yearly gap into a comparable monthly amount.*
What you meet in real life| What can differ | The shapes you meet | Why it matters |
|---|---|---|
| Deciding on payback period alone | Looking only at a new machine's payback period from labour saving, without adding the old machine's avoidable maintenance cost. | Understates the new machine's real benefit if the old one is expensive to keep running. |
| Deciding with combined savings | Adding the old machine's avoidable breakdown-maintenance cost to the new machine's labour and downtime saving before calculating payback period. | Replacing the machine also stops the avoidable cost, so leaving it out misses part of the real benefit. |
| A machine still within its useful working life | The existing machine is young, and its breakdown cost is currently close to its preventive cost, so there is little avoidable cost to add. | The decision leans toward maintaining it longer, since there is little extra saving to justify replacement now. |
| A machine near the end of its useful life | The existing machine is old, and its breakdown cost has grown well above preventive cost, so the avoidable cost is large. | Combining it with the new machine's other savings often shortens the payback period enough to justify replacing it now. |
| A domestic brand's own equipment decision | Cedar & Co.'s management team weighs replacing equipment it owns for its own Make to Stock production, judged against its own cash position. | The decision method does not depend on market or business model; only whose cash and whose production risk are at stake differs. |
| An export factory's shared equipment decision | Delta Garments weighs replacing equipment shared across several export orders, where a breakdown risks more than one buyer's delivery date. | The same combined-savings method applies, but the cost of staying with the old machine can be higher when several deliveries depend on it. |
Cedar & Co. is deciding whether to replace the packing equipment introduced in lesson 6.2, framed here as a clearly illustrative teaching example, not a fixed brand fact. The new machine's investment is USD 8,500 (illustrative, from lesson 6.1) and its own labour and downtime saving is USD 420 a month (illustrative). The old equipment it would replace has a breakdown-maintenance cost exceeding its preventive cost by USD 630 a year (illustrative, from lesson 6.2), which replacement would stop. Omar's team must decide whether combining these figures changes the urgency of the decision.
Using the workbook's own formulas, the old machine's yearly avoidable cost is converted to a monthly figure and added to the new machine's other monthly savings, and the combined total recalculates the payback period.
A common mistake is looking only at a new machine's own payback period and calling it not urgent enough to approve, while ignoring that the old machine's rising breakdown cost is itself a real, avoidable cost that replacement would stop. This makes staying with the old machine look free, when in reality the business may already be paying breakdown-level maintenance costs it could avoid by replacing sooner.
This lesson is about deciding whether to buy a new machine or keep repairing an old one, using numbers instead of a guess. A new machine's own saving tells you part of the story. The other part is what the old machine is already quietly costing in extra repairs and lost production time, beyond what scheduled upkeep alone would cost. Add both parts together before working out how many months the new machine takes to pay for itself. Leaving out what the old machine already costs makes staying with it look free, when it usually is not. Even after adding both parts, the final choice still depends on whether the business has the cash to buy now, not on the payback number alone.
Omar's team at Cedar & Co. is weighing whether to replace the packing equipment introduced in lesson 6.2.
The note the team is working from:
Does the 20.2-month figure account for the full picture of what keeping the old equipment actually costs? Decide before opening the answer.
No. The 20.2-month figure only reflects the new machine's own labour and downtime saving.
First fact. It leaves out the old equipment's avoidable breakdown-maintenance cost of USD 52.50 a month (illustrative, USD 630 ÷ 12) that replacement would also stop.
Second fact. Adding that avoidable cost gives a combined saving of USD 472.50 a month and a shorter payback period of 18.0 months (illustrative).
That is a meaningfully different answer to the urgency question the team actually needs to answer. Calling replacement "not urgent" based on labour saving alone ignores a real, avoidable cost the old equipment is already generating every month it stays in service.
Framed qualitatively, since the specific dollar figures in this course are illustrative teaching numbers, not fixed facts: judging a replacement decision on the new machine's own savings alone, while ignoring the old machine's rising avoidable maintenance cost, can make replacement look less urgent than it really is. This can leave a business paying breakdown-level maintenance costs for months or years longer than the numbers, properly combined, would support, a cost this lesson avoids by insisting both sides of the decision are added together before judging urgency.
Open the Machine investment payback calculator. Use the "Maintenance cost" sheet to find your old machine's avoidable yearly cost, divide it by 12 to get a monthly figure, and add that to the labour and downtime saving figures on the "Payback" sheet before calculating payback period. The illustrative example shows a combined payback period of 18.0 months, shorter than the 20.2 months calculated from labour and downtime saving alone. Download link: `templates/T08-C06-machine-investment-payback-calculator.xlsx`.
1. Why should the old machine's avoidable maintenance cost be added to the new machine's other savings before calculating payback period?
2. In the illustrative example, what is the combined payback period when combined monthly saving is USD 472.50 and investment is USD 8,500?
3. If an existing machine's breakdown cost is currently close to its preventive cost, with little avoidable cost between them, what does that suggest about replacing it now?
| EN | AR | FR | TR | Meaning |
|---|---|---|---|---|
| Payback period | فترة استرداد الاستثمار | Délai de récupération | Geri ödeme süresi | The time it takes for a machine's total monthly savings to add up to its total investment cost. |
| Preventive maintenance | الصيانة الوقائية | Maintenance préventive | Önleyici bakım | Scheduled inspection and parts replacement done before a machine breaks down, on a fixed timetable. |
| Breakdown maintenance | صيانة العطل | Maintenance corrective | Arıza bakımı | Repair work done only after a machine has already stopped working, usually more costly than preventive maintenance. |
| Downtime cost | تكلفة وقت التوقف | Coût des temps d'arrêt | Duruş maliyeti | The value of production lost while a machine is stopped, whether for a scheduled visit or an unplanned breakdown. |
| Depreciation | الإهلاك | Amortissement | Amortisman | Spreading a machine's purchase cost over its useful working life instead of counting it all in the year it was bought. |
You can now calculate a machine's payback period, compare preventive and breakdown maintenance cost, build a tracked maintenance schedule, and combine all three to decide whether to invest in new machinery or maintain existing machines longer. This closes Course 6. Back to the course map