Aging HVAC equipment runs inefficiently and can break down at the most inopportune time, forcing unbudgeted replacements and expensive repairs. If this sounds familiar, it’s because less than 50% of companies have preventive maintenance (or, PM) programs in place to try and avoid this unexpected downtime. This is why facing the age-old question “repair or replace?” is a common dilemma to which, luckily, there is a useful methodology.

Rooftop units (RTUs) account for roughly 60% of conditioned floor area for commercial buildings in the United States, and consume 4.3 Quads of energy annually. This consumption makes the decision to repair or replace an HVAC system critical to an organization’s bottom line. And not only do unexpected heating and air conditioning breakdowns result in unexpected expenditures, the human element is also pricey: uncomfortable employees and building occupants could lead to less productivity and/or unhappy tenants.

By taking a proactive approach to replace old, underperforming equipment with new, energy efficient HVAC equipment, facility managers can maximize savings and minimize hassles.

Replacing old HVAC systems can also help reduce environmental impact. According to data from the U.S. Environmental Protection Agency’s ENERGY STAR program, heating and cooling systems make up approximately 38% of a building’s energy usage, and companies spend more than $20 billion on energy annually. By replacing air conditioning equipment that has been in operation for 10 years, facilities can save 20-50% on energy and maintenance costs.

While a repair may cost less at the time, a replacement spend will have greater savings in the long run. When facility managers are considering whether they should repair or replace an aging HVAC system, there’s a formula to help calculate current HVAC systems costs.

1. Calculate time spent on maintenance. When calculating the cost of repairs versus replacement, consider the history of the asset. This history should include its years in operation, preventive maintenance history, and spend for on-demand service over the last two to three years. Based on data, we find that a unit that has been in operation for one to five years will cost $100/year on maintenance. However once the equipment has been in operation for 15 years or longer, that figure triples to roughly $333 per year.

2. Consider the hours/money spent on emergency repair. As mentioned earlier, equipment failures always seem to happen at the most inopportune time—whether that’s when it’s extremely hot out, at the end of the day, or on a holiday or weekend. These aren’t only inconvenient for people inside the facility, but also for the service provider and suppliers. These emergencies lead to delays in service and higher hourly rates. Depending on the age of your equipment, this could also lead to hard-to-find parts with excessive lead times.

3. Revisit energy bills. Older equipment operates at a much lower efficiency than that of new equipment. Even the best-maintained HVAC equipment that has been in operation for more than 15 years will continue to lose efficiency and will never be as efficient as newer technology that emerges.

To quantify how much money is being spent on energy for equipment, facility managers can calculate kWh usage of the equipment and multiply it by their utility cost per kWh. To give an example of what this impact might look like, by replacing inefficient RTUs with new high efficiency equipment, buildings can reduce their annual energy consumption by upwards of 50% for cooling and ventilation.

4. Understand the environmental impact. The R22 refrigerant is no longer in production after 2020, and with reserves lowering, costs are skyrocketing.

Once you’ve calculated the cost of keeping aged equipment in operation, the next important step is determining what assets to replace and in what locations. Start with an accurate asset list to determine the age of all equipment across a portfolio of locations and identify any equipment that has been in operation for at least 15 years.

Review the preventive maintenance history for the aging assets and ask yourself the following questions: Has the PM program been effective? What was the scope of work? It’s important to review the maintenance spend history over the last two to three years for repair work, as it will let you know if you are investing in an asset with diminishing or no returns. Finally, you’ll want to determine the RTU energy costs, regardless of age, to determine how much energy is being utilized and how much can be saved.

At the end of the day, taking control of an HVAC replacement strategy means saving the organization money. Using these four tips to calculate current HVAC systems costs will help avoid one-off repairs for unexpected replacements and help to create a proactive strategy to replace units that are draining funds, time, and customer satisfaction.