We’ve had an unusually warm winter this year in Dallas. It’s typical for us to get a freeze or light snow for a few weeks each winter. Instead, I found myself kicking the air conditioner on in our home last week, which was crazy!
As a result, I called my A/C guy a couple of months earlier than normal to have him do his yearly maintenance check on our unit. This is something I do every year before the summer kicks in, to ensure the unit is running ok. I want to avoid the dreaded mid-summer A/C breakdown that some people experience around these parts.
He charges me ~$100 for his service call, and usually spends about 45-60 min checking everything out. He generally performs the basic maintenance recommended by the Department of Energy…
Here’s some basic information on our house which will help build some context for the remainder of this post…
We bought the house back in 2009, and have been living in it for about 8 years total.
House Style: 1950s Ranch Style
Floors: Single Story
Size: 2,100 Square Feet
Rooms: 3 Bedrooms, 3 Baths
The original home was about 1,500 square feet, and the prior owners built an addition in the back for a new master bedroom and family room. This was done in 2006, and a new Central Air Conditioning Unit & Furnace were installed at that time.
Current A/C Unit
This means our current A/C unit is about 11 years old. It’s a Goodman model 5 ton unit, probably at a 10 SEER rating at best. For the past 3 years, my A/C guy has been topping off the refrigerant in the unit due to a small leak. This was usually included in his service fee of $100.
During his recent visit, he informed me that the type of refrigerant (R-22) my unit uses is being phased out, consequently driving the costs way up. So much so, that he told me he was no longer going to buy the stuff. In fact he used his last tank of the stuff topping mine off.
Since my leak has gradually increased over the years, I now need to top off about 20% of the capacity each year. But since the cost of the refrigerant has more than quadrupled in the past few years, he had to charge me twice the normal service call to top off the unit.
In addition, he found an issue with the capacitor, and the fan motor bearing housing. They’re not broken, but I would be rolling the dice this summer if I left them alone.
The total cost for the tune-up, topping off the phased out R-22, and the two additional repairs came out to $400.
New Unit Cost
This prompted me to start questioning him about eventual replacement costs. He gave me a ball park estimate of $6,700 to replace the entire system, ducting excluded. This was for a brand new American Standard A/C unit rated at 16 SEER, with a matching furnace. It includes installation, and one of those new remote access thermostats, which would come in handy during our slow travel trips.
Ouch! Wasn’t planning on factoring that into our 2017 budget.
We have plenty of cash reserves, so coming up with the money is not the issue. What I’m faced with is a decision to either continue repairing the unit, or replacing it outright.
Repair vs. Replace Air Conditioner
According the the Department of Energy, a typical central A/C unit should last about 15-20 years. Since my unit is still below the range, I feel like I should be getting a few more years out of it. Using the lower end of the range at 15 years, I should be able to get at least another 4 years out my A/C.
To help me decide what to do, I did a simple calculation. I took the cost of the replacement unit at $6,700, and divided it by an expected lifespan of 15 years to determine the yearly operational cost:
Operational Cost: $6,700 / 15 Years = $447 per year
As long as my repair costs are below this value, I’m still better off repairing rather than replacing. Once repairs start going well above this value, it’s better to replace the unit in the long run.
This logic applies best to a unit that’s at least 10 years old, like mine.
Since my current repair cost is at $400, I feel like getting an extra year out of the unit, assuming all goes well, is better than replacing the unit outright at this time.
I’ll need to evaluate the repair each year going forward to determine the best approach.
Of course I’m fully aware of the fact that the A/C unit could break down at any time, despite my attempts to maintain it. This is why, I’ll be setting aside some money to address this issue when the time comes.
Next week I’ll show how good habits relative to utility costs, can help “pre-fund” these types of large ticket items.
Readers, Do you agree that I should repair the unit for now, and wait for replacement? Does the replacement cost seem reasonable? How long did your A/C unit last before replacement? Do you service your unit each year? Any other thoughts or comments? Please share below!
You can call me Max…I’m a Gen-X executive planning to retire from the corporate grind by the age of 45. Although I’m already financially independent, I haven’t yet reached true financial freedom. Join me on my journey as we discuss everything from personal finance to travel and beyond.