Are you the owner or operator of a construction company, a contractor, a project manager or anyone else who relies on heavy equipment? Machines like bulldozers, skid steer loaders and excavators are essential to attaining maximum results at your job sites. They also represent a substantial expenditure.
Understanding and managing all the relevant machinery-related costs is crucial for maximizing your business’s profitability. These expenses extend beyond the initial purchase or rental price and encompass the equipment’s life span. Specific areas to consider when calculating these costs include depreciation, repairs and maintenance, and resale value, to name a few.
How Do You Calculate Construction Equipment Costs?
Determining the long-term cost of construction equipment requires an evaluation of multiple factors. You’ll need to consider the ownership/rental costs and typical operating expenses. Resale value is another key point to note.
- Ownership/rental costs: Besides the initial purchase or rental price, the costs of heavy equipment ownership include items such as insurance, taxes, licensing fees and rental protection plans.
- Operating costs: These expenses cover everything required to keep the machine on the job and functioning correctly. Examples include fuel, lubricants, maintenance, repairs, replacement parts, labor and operator training.
- Depreciation and resale value: Like vehicles, construction equipment experienced rapid depreciation. You can use several depreciation calculation methods for an accurate lifetime cost assessment. You should also determine the effect of the machine’s resale value on its total lifetime cost. One top advantage of renting is that you don’t need to worry about taking a depreciation hit since you don’t own the equipment.
Construction Equipment Life Cycle Costing
Life cycle costing (LCC) is one method many construction companies use to assess long-term equipment costs. This relatively simple concept eliminates the guesswork when budgeting for equipment and provides more peace of mind by preventing worries about unexpected repairs, unproductive downtime and machine unavailability.
The LCC calculation steps include:
- Determine the initial purchase price by subtracting the trade-in amount allowed from the machine’s selling price.
- Include the equipment’s residual/salvage value.
- Add the scheduled maintenance and repair costs over the equipment’s life span.
- Add the cost of the extended warranty that covers defective parts and workmanship.
- Include a provision for availability that guarantees the machine’s in-service time.
What Is the Average Life Span of Common Construction Equipment?
When you know how long you can expect your equipment to last, you can better understand its overall lifetime costs. Some factors that impact heavy equipment’s life span are age, job site conditions, frequency of usage and preventive maintenance. These variables can also influence heavy equipment lifetime costs — unless you decide to rent instead of purchase machines for your fleet.
Examples of the typical life expectancy of popular construction machines include:
- Wheel loaders: 7,000 to 12,000 hours
- Excavators: 10,000 hours
- Bulldozers: 10,000 hours
- Backhoes: 6,500 hours
Referencing a specific machine’s manufacturer details can give you a clearer picture of how long you can expect it to last until you need a replacement.
Strategies for Extending the Life of Construction Equipment
You can maximize performance and productivity and lower your long-term construction equipment costs by deploying a combination of expense-reducing strategies.
Conduct Timely Maintenance and Repairs
Routine preventive maintenance is crucial for keeping your equipment on the job and extending its life span. Setting up a regular maintenance schedule ensures your fleet receives the timely attention it needs to function efficiently. Additionally, depreciation will cause the value of your equipment to decrease over time. Keeping your machines in peak condition is the best way to minimize your long-term costs and get more when trading in or selling heavy equipment.
You should develop a checklist containing all areas that require service and train your operators to look for the telltale signs of mechanical issues — battery checks, belt inspections, fluid analysis and air filter replacement are just some examples. Refer to your equipment manufacturer’s instructions to form the best approach.
A benefit of renting equipment from Herc Rentals is that you’ll receive well-maintained machines in peak condition. With our Rental Protection Plan (RPP), you enjoy zero out-of-pocket repair costs. RPP Terms and Conditions may apply.
Invest in Proper Operator Training
How your operators use the equipment directly impacts its performance and longevity. For example, instructing your team not to run the machines at full speed all the time can reduce engine wear. Avoiding unnecessary idling can save money by reducing fuel consumption.
Investing in training programs and resources can help your operators develop more productive habits to reduce the strain on equipment and promote safety.
Consider Technological Upgrades and Retrofitting
Modernizing your equipment offers a practical and cost-effective solution for prolonging its life span. You can determine whether acquiring new machines or making targeted technological upgrades is the better option for your business by performing a cost-benefit analysis.
Renting vs. Buying Equipment for Construction Projects
You’ll need to decide whether renting or purchasing equipment is the more cost-effective long-term strategy for your business. Both options provide advantages and potential downsides to consider, all of which depend on your specific operations and needs. However, you’ll likely find that renting equipment provides the greatest return on investment for your team.
Cost-Related Benefits of Renting Equipment
One advantage of renting is that it gives you more control over your costs. Because you can acquire machines on a project-by-project basis, you’ll avoid the expense of storing unused equipment. Most rental providers also cover maintenance and repairs, which are among the most prominent ownership costs.
Moreover, renting offers scalability advantages. You can add the right machines quickly when you need to expand your fleet to meet a sudden increase in project volume and return them if or when the demand decreases. As a result, you’re never stuck with equipment that no longer suits your needs, which can be the case when buying equipment.
Rental Protection Plans vs. Commercial Insurance Costs
Whether you rent or buy your equipment, you’ll need to protect it against monetary losses from incidents like accidents and theft. You can purchase commercial insurance or a rental protection plan to cover these damages. You’ll need to perform a side-by-side comparison to determine which option meets your unique coverage requirements and is more cost-effective.
Contact Herc Rentals to Learn More About the Benefits of Renting
At Herc Rentals, we can help you manage construction equipment costs more effectively by renting high-quality machines and attachments. You’ll be able to develop and implement strategies to minimize the cost of construction equipment for your business.
When you choose to work with us, you get a full-service partner who wants your construction business to succeed. You’ll experience improved machine productivity and lower operating costs, allowing you to maximize your spending.
We can help you get the most out of your rental construction equipment and improve results at your job sites. We offer affordable rental protection programs that can fit your company’s requirements.
Interested in learning more about construction equipment lifetime costs or the cost benefits of renting equipment? Contact us today, and we’ll get in touch with you soon!