The following is an overview of how to pick an appliance based on three formulas: ROI, ROR, and SIR. While they should not be the only tools used in making a decision on a new appliance, they certainly can help one to choose between a few contenders by analyzing the cost against the benefit.
Our Contenders
For this comparison, we’re going to use my original set-up, a standard energy star model combined with an electric dryer and a all-in-one model with a condenser/dryer:
My original washer and dryer use 30 gallons per load (approx.) and 6.01 kWh per load.
The LG low-end pair costs $1600, use 19 gallons and 6.01 kWh per load.
The Thor Softline costs $1270, uses 14 gallons and 1.4 kWh per load. It is Energy Star rated even though it uses electricity to dry.
Payback
Payback is the most basic calculation; it is a formula that returns the number of years for the purchase of an item to “pay for itself” in cost savings.
PB = CI / SA
CI – Cost, Initial of the replacement
SA – Savings, Annual (old cost/year – new cost/year)
Payback is not the only tool you should use to make your determination, but it does give you a ballpark when shopping around. A less expensive and less efficient model can give you a greater savings, but a highly efficient but more expensive model can sometimes out-perform on this metric.
First, the payback on the LG unit:
PB = $1600 / $40 = 40 years
Now, the Thor unit:
PB = $1270 / $80 = 15.8 years
Here we run into the first problem with the LG model. It may never make it to its payback date in cost savings. The Thor is more likely to make it to full payback. Your purchase may not always “pay off”, but it’s better if it can.
Rate of Return
Rate of return, given below, is pretty straightforward. It’s the amount (%) of the original purchase you recoup in savings every year.
ROR = SA / CI
Rate of Return is simply an inversion of the payback formula, and it provides another way of comparing the same two values. This is a number you can compare with a similar investment in a mutual fund. you could use this number to compare against the cost of financing the purchase.
Again, let’s start with the LG unit:
PB = $40 / $1600 = 2.5%
Now, the Thor unit:
PB = $80 / $1270 = 6.3%
The Thor returns more than the LG in savings per year, by a factor of more than 2. When considering they have relatively the same cost and use nearly the same amount of water, it translates to a far lower electric bill.
Savings:Investment Ratio
The Savings:Investment ratio is an interesting number. It calculates the total savings over the life of an item in a ratio to its cost.
I considered Thor’s life-cycle at 20 years, and the LG at 12. Thor claims decades of use, and a sales rep at a local appliance store called a washer/dryer a decision you live with for 10-15 years.
SIR = SLC / CI
SLC – Savings per year times expected life cycle
Starting with the LG:
SLC = 12 * $40 = $480
SIR = 480 / 1600 = 0.3
And the Thor:
SLC = 20 * $80 = $1600
SIR = 1600 / 1270 = 1.26
Here, the LG is really hurt by my expectations of its longevity and the energy cost of its traditional drying system. Any amount over the initial outlay saved over its useful life-cycle is a huge savings as can be seen in the 126% ratio of the Thor unit.
Conclusion
Always consider not just the price of the unit, but the total cost of ownership or at least the total savings by moving to a more efficient appliance.
Look up the MTBF of your chosen unit for the third formula. Remember that MTBF sometime includes a standard deviation, or a statistical ‘flux’ from the mean. The mean +/- this number gives you a somewhat realistic expectancy for your unit.
It’s always good to be prepared for repairs no matter the brand’s reputation. Like I mentioned above, you’re more likely to find a LG (or Kenmore) repair person than one for Thor. Luckily, washers and dryers are simple machines, and the technically inclined can often make simple repairs with a little patience and reference material.
Formulas are from the book Residential Energy by John Krigger. I find this book a much more authoritative and reliable reference than most of the internet resources available to me.
Calculating Savings for a New Appliance
The following is an overview of how to pick an appliance based on three formulas: ROI, ROR, and SIR. While they should not be the only tools used in making a decision on a new appliance, they certainly can help one to choose between a few contenders by analyzing the cost against the benefit.
Our Contenders
For this comparison, we’re going to use my original set-up, a standard energy star model combined with an electric dryer and a all-in-one model with a condenser/dryer:
Payback
Payback is the most basic calculation; it is a formula that returns the number of years for the purchase of an item to “pay for itself” in cost savings.
PB = CI / SA
Payback is not the only tool you should use to make your determination, but it does give you a ballpark when shopping around. A less expensive and less efficient model can give you a greater savings, but a highly efficient but more expensive model can sometimes out-perform on this metric.
First, the payback on the LG unit:
PB = $1600 / $40 = 40 years
Now, the Thor unit:
PB = $1270 / $80 = 15.8 years
Here we run into the first problem with the LG model. It may never make it to its payback date in cost savings. The Thor is more likely to make it to full payback. Your purchase may not always “pay off”, but it’s better if it can.
Rate of Return
Rate of return, given below, is pretty straightforward. It’s the amount (%) of the original purchase you recoup in savings every year.
ROR = SA / CI
Rate of Return is simply an inversion of the payback formula, and it provides another way of comparing the same two values. This is a number you can compare with a similar investment in a mutual fund. you could use this number to compare against the cost of financing the purchase.
Again, let’s start with the LG unit:
PB = $40 / $1600 = 2.5%
Now, the Thor unit:
PB = $80 / $1270 = 6.3%
The Thor returns more than the LG in savings per year, by a factor of more than 2. When considering they have relatively the same cost and use nearly the same amount of water, it translates to a far lower electric bill.
Savings:Investment Ratio
The Savings:Investment ratio is an interesting number. It calculates the total savings over the life of an item in a ratio to its cost.
I considered Thor’s life-cycle at 20 years, and the LG at 12. Thor claims decades of use, and a sales rep at a local appliance store called a washer/dryer a decision you live with for 10-15 years.
SIR = SLC / CI
Starting with the LG:
SLC = 12 * $40 = $480
SIR = 480 / 1600 = 0.3
And the Thor:
SLC = 20 * $80 = $1600
SIR = 1600 / 1270 = 1.26
Here, the LG is really hurt by my expectations of its longevity and the energy cost of its traditional drying system. Any amount over the initial outlay saved over its useful life-cycle is a huge savings as can be seen in the 126% ratio of the Thor unit.
Conclusion
Always consider not just the price of the unit, but the total cost of ownership or at least the total savings by moving to a more efficient appliance.
Look up the MTBF of your chosen unit for the third formula. Remember that MTBF sometime includes a standard deviation, or a statistical ‘flux’ from the mean. The mean +/- this number gives you a somewhat realistic expectancy for your unit.
It’s always good to be prepared for repairs no matter the brand’s reputation. Like I mentioned above, you’re more likely to find a LG (or Kenmore) repair person than one for Thor. Luckily, washers and dryers are simple machines, and the technically inclined can often make simple repairs with a little patience and reference material.
Formulas are from the book Residential Energy by John Krigger
. I find this book a much more authoritative and reliable reference than most of the internet resources available to me.
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