Equipment cost per hour calculator

Know what a machine costs you every hour it runs

Bidding a job with the wrong equipment rate is one of the quietest ways a small contractor loses money. The purchase price is spread over the hours the machine will work before you sell it; insurance and other fixed yearly bills are spread over the hours it works each year; fuel and maintenance are paid by the hour. This calculator adds them up the way equipment-cost handbooks do and shows owning and operating costs separately, so you can see which one drives your rate.

Use your own records where you have them: fuel logs for burn rate, repair invoices divided by hours for maintenance, and the insurance bill. Fuel can be entered in US gallons or liters.

The formula

depreciation/h = (purchase − resale) / life hours
insurance/h    = yearly fixed costs / hours per year
fuel/h         = burn per hour · fuel price
owning/h       = depreciation + insurance
operating/h    = fuel + maintenance
total/h        = owning + operating (+ operator)

Worked example

A mini excavator bought for $85,000, expected to sell for $35,000 after 10,000 hours, run 1,000 hours a year, burning 2 gal/h of diesel at $4.00, with $8/h maintenance and $1,500/yr insurance: depreciation $5.00/h + insurance $1.50/h + fuel $8.00/h + maintenance $8.00/h = $22.50 per hour before the operator.

Frequently asked questions

What goes into equipment cost per hour?

Owning costs (depreciation, insurance, registration, storage) that you pay whether the machine runs or not, plus operating costs (fuel, maintenance, repairs, wear parts) that scale with the hours it runs. Add the operator if you bill labor and machine together.

How do I estimate life hours?

Use the hours you expect to put on the machine before you sell or scrap it — not the total it could survive. Many contractors trade compact equipment at 3,000–5,000 hours and larger machines at 8,000–12,000; manufacturer handbooks give ranges by machine class and duty.

Why does annual hours matter?

Insurance and other fixed yearly costs are spread over the hours you actually run. A machine that runs 400 hours a year carries more than twice the fixed cost per hour of one that runs 1,000.

Is this the rate I should charge?

No — it is your cost. A charge-out rate adds overhead (office, trucks, idle time between jobs) and profit on top.

Sources

1. Caterpillar Inc. Caterpillar Performance Handbook, "Owning & Operating Costs" section (hourly owning and operating cost method).
2. U.S. Army Corps of Engineers. EP 1110-1-8, Construction Equipment Ownership and Operating Expense Schedule. www.publications.usace.army.mil