Construction Equipment Ownership Costs

Construction Equipment Ownership Costs

• Economic useful life is estimated by hours of use
• Tables provide estimated useful life for different equipment under favorable, average, and unfavorable operating conditions
• Example: A crawler tractor with a $155,000 purchase price and 2,000 operating hours per year has a 6-year ownership period under average conditions.

Ownership Cost Example

• A crawler tractor costs $155,000
• Annual usage: ~2,000 hours
• Salvage value is 12% of purchase price
• Interest: 9%; Taxes: 2%; Insurance: 2%; Storage: 2%
• Estimated annual ownership cost under average conditions is calculated
• Example factors like minimum acceptable rate of return (MARR) and present worth of salvage value are incorporated

Operating Costs

• Operating costs depend on equipment age, repair, and operating conditions
• Maintenance and repair costs are a percentage of annual straight-line depreciation
• Separate costs are for replacements like tires, cutting edges, bucket teeth, and rippers.

Operating Costs: Repair

• Hourly repair cost = (Repair Factor) x (Useful Life in hours) x (Hourly Depreciation Rate)
• Repair factors vary based on equipment and operating conditions (favorable, average, unfavorable)
• Example factors from tables are used to calculate various costs

Operating Costs: Tires

• Separate cash flow analysis is used for tire maintenance and repair costs
• Tire maintenance and repair costs are estimated at 15% of hourly straight-line depreciation

Operating Costs: Fuel

• Hourly fuel cost = (Horsepower) x (Fuel Factor) x (Fuel Cost)
• Fuel factors are provided in gallons per horsepower-hour for different equipment and operating conditions

Operating Costs: Service, Downtime, Labor Cost

• Servicing costs (filter, oil, and grease) are estimated as a percentage of the hourly fuel cost
• Downtime is analyzed using an operating factor (actual working minutes/hour)
• Labor cost includes hourly wage rates plus fringe benefits (20% to 30% of actual wage rate)

Operating Cost Example (Wheeled Loader)

• A $114,000 wheeled loader with a 2,000 hour per year and 6-year useful life, $35,000 salvage value, and a 105 hp diesel engine
• Costs for fuel, operator, tires calculated to find hourly operating costs

Operating Cost Calculation Examples

• Examples of detailed calculations for repair, tire and fuel costs are provided showing step by step how those costs are estimated

This quiz explores the various factors influencing the ownership costs of construction equipment. It covers economic useful life assessments, annual ownership cost calculations, and the impact of operating conditions on overall costs. Test your knowledge on factors like salvage value, interest rates, and maintenance expenses.