Appliance Lifetime Cost
The efficient model costs more to buy and less to run. Everyone knows the trade, and almost nobody does the sum, so the decision gets made on a feeling about which is the responsible choice.
The sum is not difficult and it does not always come out the way you expect. Sometimes the efficient appliance is genuinely cheaper over its life. Sometimes it is not, and the difference turns on your power price.
The three things to remember
Lifetime cost is purchase plus running, not purchase. The kWh figure beats the star rating for comparing across sizes. And there is a break-even power price you can calculate.
Two fridges
Fridge A costs $1,200.00 and uses 400 kWh a year. Fridge B costs $1,800.00 and uses 250 kWh a year. Assume electricity at $0.30 per kWh and a twelve year life.
That is the result people do not expect, and it is worth sitting with before anyone concludes the lesson is to buy the cheap one. Change one assumption and it reverses.
The same two fridges at a higher power price
Now run it at $0.40 per kWh, which is well within the range New Zealand households pay depending on retailer, plan and region.
So find the break-even
There is a power price at which the two are exactly equal, and it is worth computing because it turns an argument into a number.
Find your per kWh rate on a recent power bill and compare it with the break-even. That is the whole decision, and it takes a minute. It also explains why blanket advice about buying efficient appliances is unreliable: the correct answer genuinely differs between two households looking at the same two products, because they pay different prices for electricity.
Reading the Energy Rating Label
The label carries two things: a star rating and an estimated annual energy consumption in kilowatt hours. Most people look at the stars. The kWh number is the more useful of the two, and for one specific reason.
| What it shows | What it is good for |
|---|---|
| Star rating | Comparing models of similar size and type only |
| Annual kWh figure | Comparing anything against anything, and doing the sum |
Stars are awarded relative to other appliances of comparable size and class. A large six star fridge can use more electricity than a small four star one, because they are being rated against different peer groups. The kWh figure has no such problem, because a kilowatt hour is a kilowatt hour.
The annual consumption on the label comes from a standardised test, and your actual use will differ with how full the appliance is, where it sits, how warm the room is and how you use it. That does not make the number useless. It makes it a fair basis for comparing two appliances against each other, which is exactly what you need it for, and a rough basis for predicting your own bill.
The three assumptions that move the answer
Repair or replace
A useful working rule is to compare the repair quote against the remaining value of the appliance rather than against the price of a new one. An appliance eight years into a twelve year life has about a third of its life left, so a repair costing more than roughly a third of a replacement is usually poor value.
Two things sit outside the arithmetic and are worth weighing anyway. A repair keeps a working machine out of the waste stream, which has a value the sum does not capture. And a new appliance restarts the reliability clock, which has a value to anyone who cannot afford a second failure soon.
What this guide does not cover
Every figure above is an illustration built from stated assumptions rather than a quoted price or tariff. Electricity prices vary substantially by retailer, plan and region, and time of use plans change the calculation again for appliances that can be shifted to off-peak periods. Substitute your own rate from a recent bill and your own expected life before deciding anything.
Related guides and tools
- Budgeting methods guide, for fitting these costs into a plan that holds.
- Average vs median guide, for reading the statistics quoted at you in marketing.
- Emergency fund guide, for the appliance that fails without warning.
- Round-up apps guide, for other places the effort and the saving do not match.
Test Your Knowledge
Ten questions on running costs, break-even and energy labels.
Sources: arithmetic worked from stated assumptions, using an illustrative electricity price rather than a quoted tariff; and the Energy Rating Label, which displays both a star rating and an estimated annual energy consumption in kilowatt hours. Electricity prices vary by retailer, plan and region, so substitute your own rate from a recent bill before drawing conclusions.