Top 4 Most Important Ownership 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 ownership costs. This impact due to purchase price having a direct effect on many other ownership cost factors like discount percentage, salvage value, freight costs, and the cost of overhaul parts.

2. Annual Use Hours – The utilization of an asset has quite possibly the most significant impact on ownership costs due to its effect on annual depreciation and annual cost of facilities capital (an allowance for the cost of money invested in machinery). It also plays a role in determining how quickly an asset can recover its fixed costs. Generally, the more an asset us utilized, the faster its fixed costs are recovered, thus lowering ownership costs.

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

4. Resale Value – It’s no secret that the market is always changing. Since the resale value of an asset influences ownership costs, it’s crucial to always be aware of the fair market value of each asset.

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