How to use it
- Enter the Purchase Price of the machine in AED.
- Enter the Salvage Value as a percentage of the purchase price - what you expect to sell it for at the end of its life.
- Enter the Life in years you will keep the machine, and the Annual Hours it will work.
- Enter the Maintenance per Hour: service, repairs, tyres or tracks and wear parts, per operating hour.
- Read the Depreciation per Year, the Total Annual Cost and the Ownership Cost per Hour, and compare the hourly figure with rental quotes.
The formula
Depreciation per year = (purchase price − salvage value) ÷ life in years, with salvage value = purchase price × salvage %. Total annual cost = depreciation + maintenance per hour × annual hours. Ownership cost per hour = total annual cost ÷ annual hours.
What changes the result
Annual hours have the biggest effect: depreciation is a fixed yearly cost, so the more hours the machine works, the lower the cost per hour. A machine that sits idle costs almost as much as one that works. A higher salvage value or a longer life also lowers the hourly cost, while heavy duty in sand and heat raises maintenance.
What this does not include
The calculator covers depreciation and maintenance only. Finance or interest, insurance, registration, storage, the operator and fuel are not included, so add them to the hourly figure before comparing it with a rental rate that includes them. To compare with renting, use the equipment rental cost calculator, and to see how many hours a year pay for the machine, use the break-even utilization calculator.
Worked examples
- A AED 850,000 excavator kept 5 years with a 15% resale value loses AED 144,500.00 a year in depreciation. With 2,000 hours a year and AED 45 an hour maintenance, owning it costs AED 117.25 per hour.
- The same excavator working only 800 hours a year has a total annual cost of AED 180,500.00, so ownership costs AED 225.63 per hour - the idle time makes it far dearer than a rental at a similar hourly rate.
- A AED 320,000 wheel loader with 20% salvage value over 6 years and 1,500 hours a year costs AED 58.44 per hour to own, before fuel, operator and finance.
- A AED 180,000 truck-mounted machine kept 4 years, with 25% salvage value, 1,200 hours a year and AED 20 an hour maintenance, has a depreciation of AED 33,750.00 a year and an ownership cost of AED 48.13 per hour.
Ownership cost per hour by annual hours
Printable chart| Hours per year | Total annual cost | Ownership cost per hour |
|---|---|---|
| 400 | AED 162,500.00 | AED 406.25 |
| 600 | AED 171,500.00 | AED 285.83 |
| 800 | AED 180,500.00 | AED 225.63 |
| 1,000 | AED 189,500.00 | AED 189.50 |
| 1,200 | AED 198,500.00 | AED 165.42 |
| 1,500 | AED 212,000.00 | AED 141.33 |
| 1,800 | AED 225,500.00 | AED 125.28 |
| 2,000 | AED 234,500.00 | AED 117.25 |
| 2,500 | AED 257,000.00 | AED 102.80 |
| 3,000 | AED 279,500.00 | AED 93.17 |
For a AED 850,000 machine with 15% salvage value, a 5 year life and AED 45 per hour maintenance. Fewer hours a year means a much higher cost per hour.
Frequently asked questions
How do I calculate the hourly cost of owning equipment?
Subtract the salvage value from the purchase price, divide by the life in years to get yearly depreciation, add the yearly maintenance, then divide by the annual hours. The calculator does all of this.
Does this include finance or interest?
No. If you buy on a loan or lease, add the yearly finance cost to the total annual cost, or add it per hour to the result.
How do I estimate the salvage value?
Use the resale percentage typical for that type of machine after the same years and hours. Checking what similar used machines are listed for on the buy pages is a practical guide.
Is it cheaper to buy or rent equipment?
Compare the ownership cost per hour, plus fuel, operator, finance and insurance, with the rental cost per hour. Owning generally pays off when the machine works many hours every year.
How many hours a year does a machine work?
It depends on the machine and the work. Use your own records of hours on similar jobs rather than a general figure, and test a lower number to see the effect.
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