Why own vs rent is a utilization question
A machine you own costs money every day of the year. Depreciation, interest on the money tied up, insurance, property tax and a place to park it add up to a fixed annual cost that you pay whether the machine digs for 2,000 hours or sits for 11 months. A rented machine costs nothing until you need it, but every hour costs more.
So the answer depends almost entirely on how many hours a year you’ll really run it. Below the break-even point, renting wins. Above it, owning wins, and the gap widens with every hour.
How the cost of owning is calculated
The calculator uses the method taught in estimating courses and used in most equipment cost guides.
Fixed costs (per year):
- Depreciation = (purchase price − resale value) ÷ years you’ll keep it.
- Average annual investment = (price × (years + 1) + resale × (years − 1)) ÷ (2 × years). It’s the average value of the machine over the years you own it.
- Interest = average investment × your interest rate or cost of money. Use your loan rate, or what the cash would earn elsewhere if you pay cash.
- Insurance and taxes = average investment × their annual rates.
- Storage = yard, security and storage per year.
Operating costs (per hour):
- Repairs and maintenance, including service, wear parts, tracks or tires.
- Fuel = gallons per hour × price per gallon.
Cost to own per year = fixed costs + operating cost per hour × hours per year.
How the cost of renting is calculated
Rental houses quote daily, weekly and monthly rates, and a month is usually much cheaper than four weeks. The calculator bills your yearly hours in the cheapest mix: whole rental months first, then the leftover as another month, a number of weeks, or weeks plus days, whichever costs less. Then it adds:
- Damage waiver, environmental fees and tax as a percent of rental charges (often 10% to 15% combined).
- Delivery and pickup for each rental.
- Fuel, which you pay on a rental too. Repairs are the rental company’s cost.
Break-even is the lowest number of hours per year at which owning costs less than renting. The chart shows both annual costs across the year so you can see how far your expected hours are from the line.
A worked example
A sitework subcontractor is deciding whether to buy a 74 hp compact track loader for $85,000 or keep renting one. It expects to keep the machine 6 years and sell it for 30% of the price. It expects about 1,200 hours a year of work out of 1,800 available.
| Cost to own | Per year | Per hour |
|---|---|---|
| Depreciation ($85,000 to $25,500 over 6 years) | $9,917 | $8.26 |
| Interest at 7.5% on $60,208 average investment | $4,516 | $3.76 |
| Insurance (1.5%) and taxes (1%) | $1,505 | $1.25 |
| Storage and yard | $600 | $0.50 |
| Repairs and maintenance ($9/h) | $10,800 | $9.00 |
| Fuel (2.5 gal/h at $4.10) | $12,300 | $10.25 |
| Total to own | $39,638 | $33.03 |
Local rates are $425 a day, $1,250 a week and $3,300 a month. 1,200 hours is 7 rental months of 160 hours plus 80 hours, which is cheapest as two weeks.
| Cost to rent | Per year | Per hour |
|---|---|---|
| Rental charges (7 months + 2 weeks) | $25,600 | $21.33 |
| Damage waiver, fees and tax (12%) | $3,072 | $2.56 |
| Delivery and pickup (6 rentals at $250) | $1,500 | $1.25 |
| Fuel | $12,300 | $10.25 |
| Total to rent | $42,472 | $35.39 |
At 1,200 hours, owning saves about $2,835 a year. The break-even is about 1,016 hours, or 56% utilization. At 900 hours a year renting would be about $960 cheaper, and at 300 hours renting wins easily. The decision rests on whether the 1,200 hours is dependable year after year, not on a single busy season.
Fixed ownership cost here is $16,538 a year before the machine moves. If work slows down, that cost doesn’t.
What the numbers don’t show
- Availability. An owned machine is there when you need it. Rentals can be short in peak season, and a day lost waiting costs crew time.
- Downtime risk. When a rental breaks, the rental company swaps it. When yours breaks, you wait for parts.
- Mobilization. If you own it, you still need a trailer and a truck to move it.
- Resale market. A well-kept, popular model holds its value. Adjust the resale percentage to what similar used machines actually sell for.
- Tax treatment. Accelerated depreciation can make buying look better in cash terms. Ask your accountant.
Related tools
Once you know what the machine costs per hour, add your operator’s true hourly cost from the labor burden calculator to build a billable equipment-and-operator rate. Owned equipment adds fixed cost to the business, so check your markup with the overhead and markup planner. To price extra equipment time on a job, use the change order calculator.