Fix It or Part It Out

[MikePhua]

Deciding whether to fix a broken piece of heavy equipment or dismantle it for parts is a question many owners, contractors, and fleet managers face. This choice affects repair costs, resale value, parts inventory, downtime, and long‑term equipment strategy. Heavy machinery—whether a 20‑ton excavator, a compact track loader, or an aging backhoe—comes with complex systems (engine, hydraulics, transmission, electrical) where repair decisions must balance cost, time, difficulty, and future value. The logic behind fixing vs. parting out is universal in the heavy equipment world, yet specific criteria help make objective decisions that minimize financial loss and optimize operational uptime.
Key Terminology
Before diving into the decision process, understanding these terms clarifies the evaluation:

• Total Loss – A situation where repair costs exceed the reasonable value of the machine either today or in projected future use.
  
• Core Value – The value of reusable components (engine, transmission, pumps) that can be sold or reused.
  
• Good‑Faith Repair Estimate – A comprehensive cost projection including labor, parts, shop time, and potential unexpected costs.
  
• Net Salvage Value – After parting out, the sum of money expected from salvage components minus labor and storage costs.
  
• Opportunity Cost – The cost of lost production while the machine is down versus the cost of buying or renting replacement equipment.
  

Knowing these definitions helps frame the fix vs. part‑out discussion in financial and operational terms.
When Fixing Makes Sense
Repairing heavy equipment is often the preferred route when:

• The machine’s market value after repair exceeds the total repair cost. For example, if a $75,000 loader needs a $15,000 hydraulic pump replacement but will be worth $80,000 afterward, repair is financially justified.
  
• There is no urgent production need for similar machines and downtime can be managed.
  
• The machine has historical value, sentimental attachment, or unique configuration, like custom farming implements or fleet‑standardized models.
  
• The equipment is still under warranty or has an extended service contract covering major components.
  

Real‑world case: A midwestern contractor had a 2010 excavator with engine failure. The repair estimate was 30% of the machine’s value and a nearby dealer guaranteed OEM parts at a discount. The contractor calculated 6 weeks of downtime vs. the cost of renting a replacement and concluded fixing saved money and kept familiarity for operators.
When Parting Out Is Better
Parting out can be a smarter financial decision if:

• Repair estimates approach or exceed 70–80% of the machine’s current value. For instance, a 25‑year‑old grader needing a complete undercarriage and cab refurb may have limited future value.
  
• Multiple core components are still valuable, meaning engines, transmissions, pumps, and electronics can be sold to cover more than repair expenses.
  
• The machine has chronic, recurring issues indicating further future expense and low confidence in reliability after repair.
  
• The owner wants to reduce fleet size or transition to a newer standard. Breaking down older machines can support parts inventories for similar equipment still in service.
  

A tractor owner in the Northeast disassembled a 1992 agricultural loader when the rebuild estimate exceeded the machine’s value. Selling the engine, hydrostatic pumps, and loader arms individually netted more than the quoted rebuild cost, with leftover scrap value when finished.
Step‑by‑Step Evaluation Process
A systematic approach prevents emotionally driven decisions and improves outcomes. Steps include:

1. Estimate Repair Cost
   • Pull quotes from dealers, independent shops, and online specialist rebuilders.
     
   • Include parts, labor, diagnostic time, and contingencies (15–25% extra for hidden damage).
     
2. Assess Current and Future Value
   • Use market pricing guides (e.g., industry blue books) and recent sales data.
     
   • Consider resale prospects post‑repair.
     
3. Calculate Salvage Value
   • List major components: engine, transmission, axles, pumps, electronics.
     
   • Price each based on parts market, adjust for condition and demand.
     
4. Estimate Downtime Cost
   • Quantify lost revenue per day vs. cost of rental alternatives.
     
5. Apply Decision Rules
   • If repair cost + downtime cost < resale value + operational value → fix.
     
   • If net salvage value + scrap > repair value and future utility → part out.
     

A spreadsheet summarizing these numbers often reveals insights that casual judgement misses.
Operational Considerations
Fixing vs. parting out is not just about money. Other factors include:

• Workforce Skillset – Do you have technicians capable of the repairs? Lack of in‑house skill increases risk and might lean toward parting out.
  
• Parts Availability – For legacy machines, parts scarcity raises both cost and lead times. If essential parts are rare or pricey, parting out may yield better returns.
  
• Fleet Uniformity – Standardizing on fewer models reduces training, tires, and parts inventory costs. Parting out non‑standard units can simplify operations.
  

On large construction sites, fleet managers track mean time between failures (MTBF) and maintenance backlog metrics. A machine with lower MTBF and repeated breakdowns often earns a “decommission” label earlier than a statistically reliable unit.
Small Stories Illustrating the Choice
An equipment dealer in Colorado once bought a broken wheel loader for a low price. After assessing it, they found the engine and transmission were near new condition and in demand. Parting it out brought in 150% of the purchase price, far exceeding the modest repair price if they had fixed it.
A municipality faced a decision on a 15‑year‑old grader that kept needing hydraulic valve replacements. The final repair quote was close to the machine’s estimated post‑repair value. Instead of repairing, they part‑out the grader, used proceeds to reduce the cost of a new purchase, and reduced maintenance strain on the public works budget.
Traffic Light Rule of Thumb
Many technicians use a simple “traffic light” rule for quick decisions:

• Green Zone (Fix) – Repair cost < 40% of current machine value, machine has future utility.
  
• Yellow Zone (Evaluate deeply) – Repair cost 40–70% of machine value; partial repairs or partial salvage plus targeted future fixes may apply.
  
• Red Zone (Part Out) – Repair cost > 70% of machine value or parts are highly valuable; parting out likely higher ROI.
  

This heuristic accelerates decisions in busy shops and buy/sell environments.
Practical Tips for Parting Out
If parting out is chosen, optimize returns with these steps:

• Catalog components with condition grades (excellent, good, fair) to help buyers price parts accurately.
  
• Offer bundled parts (engine + controller, transmission + pumps) at slight discounts to move inventory faster.
  
• Document photos and run‑out tests where possible so buyers have confidence in condition.
  
• Track part serial numbers, especially for high‑demand items like ECUs, injectors, and gearboxes.
  

Parts from aging machines can fetch 20–50% of the cost of new parts in the marketplace, depending on demand and rarity.
Solutions to Common Obstacles
Some owners worry that parting out equipment means losing future rebuild options. One solution is strategic teardown, where core components are preserved while the rest is parted out, essentially converting the machine into a “donor core” with known high‑value parts ready for future rebuild.
Another solution is phased repair, addressing only high‑value, low‑cost fixes first and revisiting major repairs later if justified by work availability or budget cycles.
Data‑Backed Insights
Industry surveys reveal that heavy equipment downtime costs can exceed $300–$500 per hour on large machines in critical jobs. This underscores that timely decisions on repairs vs. parts salvage are crucial—not just for parts value but for project timelines.
Used equipment price guides show that machines 10+ years old typically depreciate to 30–50% of original value, and major component rebuilds rarely return full replacement cost value. That’s why many owners treat aging machines as value sources for parts inventory rather than candidates for full restoration.
Conclusion
Whether to fix equipment or part it out is a nuanced business decision involving financial calculations, operational context, and future fleet strategy. Using defined criteria—repair estimates, future value, salvage potential, downtime costs—eliminates guesswork and leads to rational outcomes. Embracing structured evaluation and using industry benchmarks allows machine owners to optimize both cash flow and jobsite performance. The choice isn’t just about today’s bill but the long‑term health of an equipment fleet.