Calculating the Total Cost of Ownership for Construction Equipment

renting heavy construction equipment

What matters most to the owner of a fleet of construction equipment?

For most owners and managers, cost is the primary concern. You want equipment that gets the job done efficiently and effectively, but you also want to control costs.

But what costs are the most important? And what key factors do you need to consider when evaluating the economics of buying versus renting?

Here’s how to evaluate the most important factor to consider – the total cost of ownership (TCO).

What Is Total Cost of Ownership?

A piece of heavy construction equipment costs more than just the purchase price.

You have to factor in:

  • Depreciation and loss of value
  • Ongoing maintenance
  • Repair costs
  • Replacement costs
  • Spare parts
  • Interest (if financed)
  • Insurance
  • Fuel costs
  • Cost of tires/tracks
  • Operator cost
  • Operator hours

This creates the total cost of ownership, the single most important factor to consider when determining the economic impact.

Why TCO Matters

TCO for heavy construction equipment matters because buying or renting heavy construction equipment is a big investment, easily the largest capital outlay for a construction company.

One immediate implication is that the lowest purchase price isn’t necessarily the best. While it makes a difference if all other factors are considered equal – after all, Machine A is a better choice than Machine B if Machine A has a lower sticker price and the two machines are otherwise the same – TCO comes into play because machines aren’t all the same.

The classic example is having a machine (Machine A) that costs more initially but has a lower maintenance cost and higher fuel efficiency rates than Machine B. Machine A has a higher retail price but has a lower TCO than Machine B – making Machine A the best choice.  Our service department is fully capable of service and maintenance for major brands of heavy construction equipment. We have locations in Alabama, Florida, and Georgia that are ready to help you protect your investments and increase the lifespan of your machines.

TCO can also help you decide about buying or renting heavy construction equipment. You can work out hourly TCO using this calculator from Volvo and decide if it’s cheaper to rent or buy the piece of equipment.

Speak with a Cowin Representative to learn more about TCO and figure out whether it makes the most sense financially for your company to rent or purchase equipment.