Equipment Ownership Costs

What counts as an ownership cost?

Ownership costs arise from having a machine in the fleet, whether it is working today or parked. Common categories include depreciation, interest or financing, insurance and property taxes. The categories depend on the purpose and rules of the calculation.

Ownership versus operating costs

Fuel, wear items and repairs normally belong to operating-cost analysis. Keeping the categories separate helps a contractor see whether cost pressure comes from capital tied up in equipment or the work performed by it. Operator labor may be accounted for separately.

A simple planning example

If annual allocated ownership cost is $40,000 and expected annual use is 2,000 hours, the ownership portion is $20 per hour. At 1,000 hours it becomes $40 per hour. These are illustrative values, not a recommended rate.

Use a consistent rate basis

USACE publishes a specific construction-equipment ownership and operating rate methodology. Company internal rates and contract reimbursement rules may differ. Avoid mixing book depreciation, tax depreciation and economic loss in resale value.