Owning cost and operating cost
A machine costs money in two ways. Owning cost is what it costs to have the machine at all, whether it runs this week or not: it loses value, the money tied up in it has a cost, and it needs insurance, a place to sit and its licenses. Operating cost is what it costs only when it runs: fuel, maintenance and repairs, and parts that wear out.
This calculator adds both into a cost per hour for one machine, whether an excavator, a loader or a lift. The owning costs are yearly amounts, so each is divided by the hours the machine runs in a year. The operating costs are already per hour.
The formulas, with the example machine
Depreciation spreads the price less the salvage value over the life. Cost of money takes the average of the price and the salvage value times the yearly rate. Fuel is gallons per hour times the price per gallon. The machine cost per hour is ownership plus operating.
Each line is rounded to the cent and the subtotals add the rounded lines, as our equipment cost per hour worksheet does, so the two agree to the cent. The calculator opens on the worksheet's example machine. Every figure is an example you replace with your own.
| Line | How it is worked out | Per hour | |---|---|---:| | Depreciation | ($72,000 − $22,000) ÷ (6 years × 1,000 hours) | $8.33 | | Cost of money | ($72,000 + $22,000) ÷ 2 × 7% ÷ 1,000 hours | $3.29 | | Insurance | $1,800 ÷ 1,000 hours | $1.80 | | Storage and yard | $600 ÷ 1,000 hours | $0.60 | | Licenses and taxes | $0 ÷ 1,000 hours | $0.00 | | Ownership cost | The five lines above, added | $14.02 | | Fuel | 3.2 gallons × $3.90 | $12.48 | | Maintenance and repairs | Typed in | $6.50 | | Tires, tracks and wear parts | Typed in | $4.00 | | Operating cost | Fuel, maintenance and wear, added | $22.98 | | Machine cost | Ownership plus operating | $37.00 | | Operator | Typed in | $38.00 | | With operator | Machine cost plus operator | $75.00 |
How to use it
- Under Ownership, enter the purchase price, the salvage value, the useful life in years and the hours the machine runs in a year. Then enter a cost of money as a percent a year and the yearly insurance, storage and yard, and licenses and taxes. A blank licenses field counts as $0.00.
- Under Operating, enter the fuel gallons per hour and price per gallon, then the maintenance and repairs and the tires, tracks and wear parts, each per hour.
- Under Operator, enter the operator's cost per hour for the rate with an operator, or leave it blank for the machine alone.
- Read the plate and the lines under it. The math block shows each step with your numbers. Copy link saves them in the link, not on our servers.
Useful life and hours per year must be above 0, because the costs are divided by them, and the salvage value can't be more than the purchase price. The calculator says so next to the field and shows nothing else until it is fixed.
Hours per year matter more than they look. The same yearly costs spread over fewer hours make every hour cost more, and over more hours make it cost less. Use the hours you expect the machine to run, not the hours in a year.
Using the hourly cost in a bid or a T&M rate
An hourly cost is a cost, not a price. In a bid, multiply it by the hours the job needs the machine and enter the result as a cost line. Overhead and profit come after: our overhead rate calculator works out the overhead, and the bid price calculator turns costs into a price at a margin you choose.
If the machine goes out with an operator, use the operator's burdened rate, not the bare wage. Our labor burden calculator builds one from your own payroll figures, and the labor burden guide explains which costs belong in it.
About the example figures
The starting numbers are the worksheet's worked example, not a typical machine, a rental rate or a target. Nothing on this page says what a machine, its fuel, its upkeep or its hour should cost. The math is arithmetic, and the only inputs are yours. It does not say how to depreciate a machine for taxes or for your books.
FAQ
How do I calculate equipment cost per hour?
Add the ownership cost per hour and the operating cost per hour. In the example, $14.02 + $22.98 = $37.00.
Can I use it for an excavator, a loader or a lift?
Yes, for any machine. The calculator holds no figures for any kind of machine, so the answer comes from your numbers.
Is this a rental rate?
No. It is the cost of owning and running your own machine. A rental rate is a price someone sets, and this page does not set one.
What if the machine has no salvage value?
Enter 0. The depreciation then spreads the whole price over the life.
Should the operator be included?
Only if the rate you are building includes the operator. The plate shows the machine alone, with the cost with an operator beside it once you enter an operator cost.
Related tools
- The free equipment cost per hour worksheet does the same arithmetic for up to four machines in Excel.