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Australian Forestry Equipment

Capital decision

Buy versus hire comparison

Owning spreads a large fixed cost across whatever hours you actually work. Hiring converts it to a variable cost and hands back the residual-value risk. This finds the hours per year at which the two cross.

If you own it
$
$
years
$

Finance, insurance, registration, storage.

$/h

Fuel, consumables, service and repairs. Exclude the operator if it is the same either way.

If you hire it
$/h
$/h

Whatever the hire rate does not cover — often fuel and some consumables.

Utilisation
h

Be honest. This is the variable that decides the answer.

Annual cost — own

$103,200

$114.67/hour

Annual cost — hire

$136,800

$152.00/hour

Owning saves

$33,600/year

At these hours, ownership is cheaper — but that assumes the hours actually materialise.

Break-even utilisation

577hours/year

Above this, owning is cheaper. Below it, hiring is.

Cost across a range of utilisation

Hours/yearOwn — annualHire — annualOwn — $/hCheaper option
360$77,280$54,720$214.67Hire
540$85,920$82,080$159.11Hire
720$94,560$109,440$131.33Own
900 (your plan)$103,200$136,800$114.67Own
1,170$116,160$177,840$99.28Own
1,530$133,440$232,560$87.22Own
1,980$155,040$300,960$78.30Own

What the arithmetic does not capture

Reasons to buy anyway

  • · Predictable work on a long contract term
  • · A specialist operator who will only stay for a machine of their own
  • · The machine gives a genuine strategic advantage in tendering
  • · Availability matters more than cost, and you control your own maintenance

Reasons to hire anyway

  • · The project is temporary or the equipment need is unusual
  • · Utilisation is uncertain — the hours above are hope, not contract
  • · You want to measure actual productivity before committing capital
  • · Dry hire lets you win the work first and buy only once demand is proven

What this answers

The decision behind the calculation

Ownership and hire are not a preference, a philosophy or a cash-flow question in the first instance. They are a utilisation question: below a certain number of hours a year, hire costs less; above it, ownership does. This calculator finds that crossover for your own numbers.

The reason it matters is that the fixed costs of ownership — depreciation, finance, insurance, registration — continue whether the machine works or not, while a hire rate is only incurred when the machine is on site. A machine used intermittently carries its full annual cost across very few productive hours, which is how a visibly cheaper hourly rate becomes the more expensive option.

The crossover is a starting point rather than a verdict. Availability, attachment compatibility and the value of having a machine on hand all sit outside the arithmetic, and they legitimately move the decision — but they are easier to weigh once the number is known.

The inputs

Where an honest number for each field comes from

A calculator is only as good as what goes into it, and most of these fields have a value that is easy to assume and a value that is true.

FieldWhere the number comes fromThe trap
Purchase price and expected resaleDelivered cost including attachments, and a residual verified against recent comparable sales.An optimistic residual moves the break-even in favour of owning, which is exactly the direction a buyer is already inclined.
Ownership periodHow long you would actually keep the machine, aligned with the finance term.A longer period lowers annual depreciation and flatters ownership. Use the period you would genuinely hold it for.
Other fixed cost per yearFinance, insurance, registration, storage and any standing compliance cost attached to the machine.Omitting finance is the most common error and it understates ownership materially in the early years.
Variable cost per hourFuel, consumables and service under ownership — the costs that stop when the machine stops.Including operator cost here distorts the comparison unless the hire rate is also operated. Compare like with like.
Hire rateA current quoted rate for the machine you would actually hire, including delivery and any minimum-hire terms.Headline rates frequently exclude float, minimum periods and damage waiver, all of which are real costs of the hire option.
Productive hours per yearThe hours you can genuinely commit to this machine, from contracted work rather than hoped-for work.This is the input the whole comparison turns on, and it is the one buyers most often inflate.

The output

How to read the result

Annual cost — own versus hire

The two annual totals at your stated utilisation. The comparison is only valid if both include the same scope — operated versus dry, delivery included or excluded.

Break-even utilisation

The annual hours at which the two options cost the same. Above it, ownership is cheaper; below it, hire is. Compare it against your contracted hours, not your ambition.

The saving

What the better option saves per year at your stated hours. Where the margin is small, the non-financial factors should decide rather than the arithmetic.

Worked example

Why the break-even matters more than the rate

  1. 1Ownership fixed costs — depreciation, finance, insurance and registration — are incurred whether the machine works 400 hours or 2,000.
  2. 2A hire rate is incurred only for hours worked, but it carries the hire company's own fixed costs, margin and utilisation risk inside it.
  3. 3So the hire rate is always higher per hour, and ownership is always cheaper past some number of hours.

The entire decision reduces to whether your committed hours sit above or below that crossing point, and how confident you are in them.

A buyer comparing a hire rate against an owned machine's fuel and operator cost is comparing two different things and will always conclude that owning is cheaper.

Avoid

Errors that make the answer wrong, not just imprecise

Comparing a hire rate against variable costs only

The hire rate covers the hire company's depreciation, finance and margin. Comparing it against your fuel and operator cost alone omits your own fixed costs and guarantees the wrong answer.

Comparing operated hire against dry ownership

If the hire rate includes an operator, the ownership side must include operator cost too. Mismatched scope is the most common source of a misleading result.

Using hoped-for hours

The break-even is only as good as the utilisation input. Use contracted or historically achieved hours; if the honest number is uncertain, that uncertainty is itself an argument for hire.

Ignoring hire availability

Hire is only cheaper if the machine is available when the work is. In peak season, or for specialised attachments, availability can be the binding factor regardless of the arithmetic.

Questions

Common questions about this calculation

Where does the break-even usually fall?

It moves too much with capital cost, residual, finance terms and local hire rates for a general figure to be useful, which is why this is a calculator rather than a rule of thumb. What holds generally is the shape: hire wins at low utilisation, ownership wins at high, and the crossing point is sensitive to the residual value you assume.

What if my hours are uncertain?

Uncertainty argues for hire, because hire converts a fixed cost into a variable one and that is precisely what an uncertain workload needs. Run the calculation at the low end of your plausible hours as well as the expected figure; if ownership only wins at the optimistic number, it has not really won.

Does hire make sense for attachments as well as machines?

Often more so. Attachments used a handful of days a year carry capital cost daily and earn on very few of them, and hire keeps the coupler free for the work that pays. The same break-even logic applies, and attachments frequently sit well below it.

What about the things the calculation cannot capture?

Availability when you need it, configuration exactly as you want it, familiarity for your operators, and the ability to quote work at short notice all favour ownership and none of them appear in the arithmetic. Treat the break-even as the financial baseline, then decide consciously what those factors are worth — rather than letting them substitute for the calculation.

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