The primary function of equipment managers is to replace the right equipment at the right time and at the lowest overall cost. In this paper, the opportunities and challenges associated with equipment replacement optimization (ERO) are discussed in detail. First, a comprehensive review of the state-of-the art and state-of-the practice literature for the ERO problem is conducted. Second, a dynamic programming (DP) based optimization solution methodology is presented to solve the ERO problem. The Bellman’s formulation for the ERO deterministic (DDP) and stochastic dynamic programming (SDP) problems are discussed in detail. Finally, comprehensive ERO numerical results and implications are given.