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Top 4 Most Important Operating Cost Factors

Understanding equipment costs can be difficult, but understanding all of the moving parts to an assets ownership costs can prove to be even more challenging. Knowing which cost factors have the largest impact on final ownership costs can help reveal quite a bit about equipment costs and performance.

Key Takeaways for Decision Makers

EQUIPMENT MANAGER: Equipment costs are one of the most vital components to a successful business, and understanding each individual cost factor and their relative impact is just as important as knowing the overall cost of owning and operating heavy equipment.

1. Purchase Price – The initial purchase price has one of the largest influences on an assets operating costs. This impact is likely due to the fact that purchase price is directly correlated with maintenance and repair related cost factors like the cost of field repair pars, cost of ground engaging components, tire costs, and cost of miscellaneous supply parts.

2. Annual Use Hours – The annual utilization also has a significant impact on operating costs due to its effect on annual depreciation and annual cost of facilities capital (an allowance for the cost of money invested in machinery). Generally, the more an asset is utilized, the faster fixed costs are recovered, thus lower ownership costs. However, on the flip side, if an asset is used too much there is a higher likelihood of incurring additional maintenance, repair, and fuel costs.

3. Mechanics Wage – If any type of field repair is being done on an asset, a mechanic obviously must do the job. As one would expect, mechanics wage has a direct impact on field repair costs.

4. Fuel Costs – Fuel Costs have quite possibly the most significant impact on operating costs. Depending on the horsepower and fuel consumption of an asset, fuel costs can account for over half of the operating costs in some cases, thus, highlighting the importance of understanding an assets fuel costs and fuel trends.

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