When is it time to replace my macbook battery?

You can always try to call Apple Care, there were several batteries return programs, check if your are eligible to theses programs with your serial number.

Generally, Apple Care does not cover this because the battery is still in working condition and no apple will not replace your battery just because the battery life has gone down.

IF you still have your Applecare plan, you are in luck though. As an Apple genius, I would recommend going to the Apple store and making up a fake story about how your laptop frequently turns off once you switch to the battery. To be completely honest, most people who work as geniuses don’t have the time to check whether your story is true or not (and even if we know its false, we dont want to get into an argument). For this case, we would just instantly replace your battery, if you are still covered by applecare.

If you are not convered by applecare, you can always get a macbook battery from eBay for about $ 35–65 and replace it yourself

I would also try reseting the System Management Controller which could be giving you bad readings.

1. If the computer is on, turn it off.
2. Disconnect the AC Adapter and remove the computer’s battery.
3. Press and hold down the power button for 5 seconds and then release the button.
4. Reconnect the battery and AC Adapter.
5. Press the Power button to restart the computer.

Also try reseting your PRAM as well. Restart, hold down (command + option + p + r), keep holding it down while it reboots for 2–3 cycles.

Have you calibrated your battery? Calibrating a MacBook battery

I suggest that you replace the battery. I have found a few battery online…
http://www.my-batteries.co.uk