First take off the head on the air pump and check the reed valves on the valve plate. If they got hot and warped or cracked they'll work to a point then no more pressure can be built up. Next check the pistion ring and cylinder wall. If either is damaged you'll only get so much pressure build-up then it will leak past the piston.
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Needs a piston / cylinder most likely - they are not lubricated and wear out. My suggestion is replace the piston / cylinder kit and valve plate at the same time.
Unfortunately, you need to weigh up whether or not it is worth the repair because it is a low cost tool.
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Wanted to pass on to toolstore05 that his solution was right on. I took the head off the compressor last night and found that one of the reed valves had indeed broken off. Ordered a new valve plate and gasket kit (and a replacement screw that I dropped and kicked somewhere) this morning and am confident that the compressor will be as good as new soon. Thanks a million for your advice so I didn't have to buy a new compressor.
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