BUSINESS
How to Estimate Equipment Hourly Cost
Contractor method for pricing equipment: depreciation, fuel, maintenance and utilization.
Equipment pricing fails when it ignores depreciation. The true hourly cost includes what you paid, what it consumes and what it needs to stay running.
THE SHORT ANSWER
How do you estimate equipment hourly cost?
Divide the purchase price by its lifespan, add annual fuel and maintenance, then divide by annual hours. A $35,000 machine over 5 years at 1,500 hrs/yr with $27,000 fuel and $2,500 maintenance costs $24.33/hr.
Spread the purchase price
Depreciation divides the purchase price over its lifespan in years. A $35,000 machine over 5 years costs $7,000/year before it ever runs.
- Use the real purchase price
- Estimate a realistic lifespan
- Include interest or lease if applicable
- Add major overhauls
Add fuel and maintenance
Fuel is hours × rate per hour. Maintenance covers annual service, repairs and consumables. Both are real costs you must recover.
Divide by hours
The hourly cost = (depreciation + fuel + maintenance) ÷ annual hours. Use the Equipment Hourly Cost Calculator, then add the operator and profit for a rental or billing rate.
Check utilization
A machine that runs more hours per year is cheaper per hour. If you under-use equipment, its true cost is higher than you think.