THE INDUSTRY STANDARD
EquipmentWatch Lowest Cost of Ownership Methodology 2021
For each of our 20 award categories, our analysts looked at the most popular equipment observed on the resale channel during the 12-month period between March 2020 and February 2021. The models were sorted by their relative popularity on the resale channel, and our analysts removed any models not currently in production in North America. Only models which had 10 occurrences for a specific year on the resale channel were considered, i.e., specific models could have had multiple model years included in the calculations if it had more than 10 occurrences on the resale channel.
Calculation of Ownership & Operating Costs
EquipmentWatch’s ownership costs are calculated according to standard Rental Rate Blue Book calculations and methodology. Using the same 12 months of data from the resale channel, analysts cleaned the results and determined the average annual utilization for each model. Analysts forecasted residual values for each model to represent the resale value over the five-year period. Along with the average annual use hours and residual values, analysts also used the Original Price for each model in the ownership cost calculation alongside other standard cost factors. This calculation was run for each model, for each of the first five years of the machine’s economic life.
Once ownership costs were calculated for every model, the hourly ownership costs for every model were compressed using a geometric progression. This progression weights the ownership costs for new model years more heavily than the costs for older model years. For example, the hourly ownership costs for when the model is new are weighted more heavily than the hourly ownership costs for when the asset is five years old. Once all the five-year ownership costs were calculated, averages were taken by manufacturer and award category. The manufacturer that had the lowest five-year total cost of ownership average across all models was selected as the winner.