Plant hourly cost calculator
The hourly cost of a machine is ownership cost per hour (depreciation, interest and insurance) plus operating cost per hour (fuel, maintenance and operator). Multiply by the job hours for the total, then compare it with a hire rate for the same hours to see whether owning or hiring is cheaper.
On this page
Ownership cost per hour
Ownership costs are incurred whether or not the machine works, so they are spread over the hours it is used. The calculator applies three. Depreciation = (purchase price - resale value) / life in hours. Interest = the average of price and resale value x annual interest % / hours used per year. Insurance = purchase price x insurance % per year / hours used per year.
Interest on the average investment is a common shortcut, and counting a return on tied-up capital, not only cash costs, lets you compare owning with hiring honestly. The interest and insurance rates are your own inputs, not market figures.
Operating cost per hour
Fuel = litres per hour x the fuel price per litre you enter. Maintenance is a percentage of the purchase price per year divided by hours used per year, or a flat AED per hour if you fill that box in. A typed 0 in the AED box is used as 0 and a blank box falls back to the percentage. The operator is the monthly cost divided by the hours worked per month.
Some guides keep operator wages out of the machine rate and track them separately, so the calculator shows the operator on its own line. Set the operator cost to 0 if you want a machine-only rate.
Own or hire
Enter a hire rate per hour and the calculator multiplies it by the job hours and shows which route is cheaper and by how much. Check that the hire rate covers the same things as your owned rate, such as the operator and fuel, or the comparison is not fair.
Utilisation drives the answer, because the same ownership cost spread over more hours falls per hour. Plant, vehicles and equipment can be kept on the assets and documents register with depreciation posted to the ledger, and finance and VAT covers the books. Operator pay runs through payroll and WPS, and a project's costs sit in projects and tenders. Other guides to read are the procurement guide and the tendering and costing guide. Related tools: the crew size calculator, the earned value calculator, the VAT calculator and the overtime calculator.
Worked example
An excavator bought for AED 400,000, resold for AED 100,000 after 10,000 hours, used 1,500 hours a year.
| Line | Working | AED per hour |
|---|---|---|
| Depreciation | (400,000 - 100,000) / 10,000 | 30.00 |
| Interest at 8% | 250,000 x 8% / 1,500 | 13.33 |
| Insurance at 1.5% | 400,000 x 1.5% / 1,500 | 4.00 |
| Ownership | 30 + 13.33 + 4 | 47.33 |
| Fuel | 12 litres x AED 3 | 36.00 |
| Maintenance at 5% | 400,000 x 5% / 1,500 | 13.33 |
| Operator | 6,000 / 200 | 30.00 |
| Operating | 36 + 13.33 + 30 | 79.33 |
| Total per hour | 47.33 + 79.33 (from unrounded figures) | 126.67 |
Worked example
An excavator bought for AED 400,000 and resold for AED 100,000 after 10,000 hours has depreciation of 300,000 / 10,000 = AED 30 an hour. At 1,500 hours a year, interest at 8% on the average investment of 250,000 is AED 13.33 and insurance at 1.5% is AED 4, so ownership is AED 47.33. Fuel of 12 litres at AED 3 is 36, maintenance at 5% is 13.33 and the operator is 6,000 / 200 = 30, so operating is AED 79.33. Total AED 126.67 an hour, or AED 50,666.67 for 400 hours, against AED 60,000 at a hire rate of AED 150, so owning is cheaper by AED 9,333.33. The AED 3 fuel price is only an example.
Questions people ask
What is included in ownership cost?
Depreciation, interest on the capital tied up and insurance. They are incurred whether or not the machine works.
What is included in operating cost?
Fuel, maintenance and the operator. They are incurred per hour of use.
Why use the average of price and resale for interest?
The capital tied up falls from the purchase price to the resale value over the life, so the average is a common shortcut.
What fuel price should I enter?
Your own current price per litre. The calculator does not state what fuel costs.
How do I enter maintenance?
As a percentage of the purchase price per year, or as AED per hour. A filled AED box overrides the percentage.
Should the operator be in the machine rate?
Some firms track operator pay separately. Set the operator cost to 0 for a machine-only rate.
Does the hire rate include the operator and fuel?
It depends on the supplier, so confirm it. Compare like with like.
Why do the lines not add exactly to the total?
Each line is rounded on its own, while the total is worked from unrounded figures.
Is straight-line depreciation right for tax or accounts?
This is a costing method, not an accounting policy. Your accounts and tax treatment may differ.
Where do I record the machine?
On the asset register, so cost, depreciation and disposal are tracked in one place.