The purpose of this study was to propose useful suggestion by analyzing preventive replacement policy under which there are minor and major failure. Here, major failure is defined as the failure of system which causes the system to stop working, however, the minor failure is defined as the situation in which the system is working but there exists inconvenience for the user to experience the degradation of performance. For this purpose, we formulated an expected cost rate as a function of periodic replacement time and the number of system update cycles. Then, using the probability and differentiation theory, we analyzed the cost rate function to find the optimal points for periodic replacement time and the number of system update cycles. Also, we present a numerical example to show how to apply our model to the real and practical situation in which even under the minor failure, the user of system is not willing to replace or repair the system immediately, instead he/she is willing to defer the repair or replacement until the periodic or preventive replacement time. Optimal preventive replacement timing using two variables, which are periodic replacement time and the number of system update cycles, is provided and the effects of those variables on the cost are analyzed.