My next-door neighbor invested in new LED (Light Emitting Diode) lights this Christmas season.    So I started thinking whether we should do the same.  I decided to do my own financial analysis comparing the initial cost, energy cost and the replacement cost between the two kinds of lights. By the way, the inspiration for this analysis came from Jessica Knows who is running a Nickelodeon Holiday Money Saving Contest for $500 Wal-Mart gift certificate.  (I hope I win!!)

First I evaluated how much money I would need to invest in the new LED Christmas lights.  We usually decorate the roof line on the front of our house with white icicle lights.  We use six strands of the incandescent lights which come in a set of 200 lights and are 9 feet in length.  Their cost is $10 at Wal-Mart.  I found a set of 70 LED lights that are 9 feet long for $16.

I use couple of strands of multi-colored mini lights on the bushes in the front of the house.  And the Christmas tree gets couple of strands as well.  The incandescent lights come in 51-foot strands and cost $10.  I found LEDs of the same kind that come in 24-foot strands and cost $16.  Looks like for each incandescent strand, I would have to purchase two LED strands.

So far I will have to invest $124 more up front for the LED lights.

Second, I looked at how much money I would have to spend on each kind for the energy use.  I found that if I run the lights for 6 hours per day, every day for six weeks, I would spend $17 on the incandescent lights and $2 on the LED lights.

Third I looked at how often I would have to replace the LED lights versus the incandescent lights.  LED lights manufacturers claim that they would last 50,000-100,000 hours.  Since I would only use my Christmas lights 250 hours per season, these LED lights should easily outlive me, my kids and possibly my grand kids.  On the other hand, I will have to replace the incandescent lights every five years.

Taking all of this into consideration, looks like the difference in initial investment for the LED lights will pay for itself within 5 years.  This graph shows how much money I would spend on each kind of Christmas lights within 10 years:

Looks like if I keep using the incandescent lights I would spend almost $500 in the next 10 years, and I would spend half of that using LED lights.  As this pattern continues, the difference will triple in 20 years and quadruple in 30 and so on.

So what am I going to do this year?

I decided to keep using the incandescent lights, since we already have them.  Investment of $224 on the LED lights is a little steep for me this season. But as my short-lived incandescent lights die off within the next couple of years, I will more likely replace them with the LED.  This will also give me some time to find out how my neighbor’s LED lights are holding on!