Total Cost of Ownership Cost Analysis:

Used vs. New Computers for Schools

Have you ever been asked to justify your assertion that purchasing a refurbished computer is less expensive than purchasing a “New” pc?  It seems the issue of warranty, repair and energy consumption is almost always used as a reason to avoid the decision to purchase these machines.

Recently, a school district in the Midwest attacked the issue by laying out this basic formula to analyze the total cost of ownership for the computers they put into their schools.

1. Total Cost of Ownership (TCO) = (Unit Cost/Machine Life) + Estimated Yearly Repair Costs + Estimated Yearly Energy Costs
2. Used PC Machine Life = 3 years – 6 years
3. New PC Machine Life = 6 years
4. Estimated Yearly Repair Costs = (Estimated Yearly Failure Rate * Average Failure Cost)
5. Estimated Yearly Failure Rate = 5%
6. Average Failure Cost for a PC: with No Warranty = $100; with Onsite Warranty = $10; with Parts Warranty = $30
7. Energy Costs = (Active Hours Per Year * Active Watts Used) + (Standby Hours Per Year * Watts Used) * Energy Rate Kwh / 1000 w/kw)
8. Active Hours Per Year = 6 * 175 School Days = 1050 hours
9. Standby Hours Per Day = 4 * 175 School Days = 700 hours
10. Energy Rate kwh = $0.0820/kwh

A new PC with a 3-year onsite warranty lists on Dell’s website as follows:

• New DELL Optiplex 360, no monitor, Intel Pentium Duo Core 2.2Ghz, 1GB RAM, 80GB Hard Drive, basic options, three-year onsite warranty, educational pricing on Dell's website: $548.00

A used Dell Optiplex GX280 purchased through EduTech Group would price out as follows:

• Used DELL Optiplex GX280, no monitor, 2.8GHz, 1GB RAM, 40GB Hard Drive, basic options, 210W power supply, 1-yr parts warranty, www.edutech-group.com price: $175.00, 3-yrs active life
• Used DELL Optiplex 745, no monitor, 2Core 2 Duo 2.2GHz, 1GB RAM, 40GB Hard Drive, basic options, 280W power supply, 3-yr parts warranty, www.edutech-group.com price: $325.00, 6-years active life

Now we can run our TCO formulas and compare.

New Optiplex 360:

• The new Optiplex 360 repair cost calculation would be ((($10 * 3 years) + ($100 * 3 years)) * .05) / 6 = $2.75/year
• The new Optiplex 360 energy costs calculation would be ((1050 * 255W) + (700 * 255W)) * $0.0820/kwh / 1000 = $36.59/year
• The new Optiplex 360 TCO calculation is: ($548 / 6) + $2.75 + $36.59 = $130.67/year

Used Optiplex GX280:

• The used GX280 repair cost calculation would be (($30 *1yr)+($100 * 2 years))  * .05) / 3 = $3.83/year
• The used GX280 energy costs calculation would be ((1050 * 210W) + (700 * 210W)) * $0.0820/kwh / 1000 = $30.14/year
• The used GX280 TCO calculation is: ($175.00 / 3) + $3.83 + $30.14 = $92.30/year

Used Optiplex 745:

• The used Optiplex 745 repair cost calculation would be (($30 *3yr)+($100 * 3years))  * .05) / 3 = $6.5/year
• The used Optiplex 745 energy costs calculation would be ((1050 * 280W) + (700 * 280W)) * $0.0820/kwh / 1000 = $40.18/year
• The used Optiplex 745 TCO calculation is: ($325.00 / 6) + $6.50 + $40.18 = $100.85/year

So, based on the formula the used computer proves to be a better value--a $38.37/yr for the GX280 and $29.82/yr for the Optiplex 745.  That's a 29.4% and 22.8% savings respectively over new.