Cost of ownership

Machine cost calculator

Purchase price is only the first line. This models the full hourly cost of a forestry machine and converts it into the unit you actually sell — then shows how fast that number moves when utilisation or production misses plan.

Capital and utilisation

Purchase price

Expected resale

Ownership period

years

Productive hours per year

Productive hours, not engine hours.

Operating cost per hour

Fuel burn

L/h

Fuel price

$/L

Operator cost

$/h

Service and repairs

$/h

Consumables

$/h

Teeth, chain, knives, tracks.

Other fixed cost per year

Finance, insurance, registration, telematics, admin.

Production

Unit of saleable production

Production per productive hour

m³/h

Depreciation

$40.00/productive hour

$100,000 per year over 5 years.

Total machine cost

$232.70/hour

$58.40/h fixed + $174.30/h variable.

Machine cost per m³

$9.31/m³

The number every specification should connect back to.

Annual machine cost

$581,750

Against 62,500 m³ of annual output.

Utilisation sensitivity

Fixed cost is spread across whatever hours the machine actually works. This is the single largest lever in forestry machine economics — and the one most often estimated optimistically.

Productive hours/year	Total cost/hour	Cost per m³	Versus plan
1,250 h	$291.10	$11.64	+25.1%
1,750 h	$257.73	$10.31	+10.8%
2,125 h	$243.01	$9.72	+4.4%
2,500 h (your plan)	$232.70	$9.31	—
2,875 h	$225.08	$9.00	-3.3%
3,250 h	$219.22	$8.77	-5.8%

Production sensitivity

At a fixed hourly cost, a drop in production translates directly into cost per unit. This is why a demonstration in representative material matters more than a specification sheet.

Production per hour	Cost per m³	Versus plan
17.50 m³/h	$13.30	+42.9%
21.25 m³/h	$10.95	+17.6%
25.00 m³/h (your plan)	$9.31	—
28.75 m³/h	$8.09	-13.0%

What this answers

The decision behind the calculation

Purchase price is the number everyone negotiates and almost never the number that decides whether a machine earns. What decides it is the total cost of an hour of production — depreciation, finance, fixed annual costs, fuel, operator, service and consumables — divided by what that hour produces, expressed in the unit the client actually pays for.

That conversion is the point of this calculator. A contractor quoting per cubic metre, per tonne, per hectare or per stump needs to know what the machine costs in that same unit before a rate can be defended. Quoting from a competitor's rate, or from a gut feel about the hourly cost, is how businesses discover after two years that they have been working profitably on paper and cannot fund a replacement machine.

The most instructive thing the model does is show how fast the answer moves. Utilisation and production are the two inputs most often assumed rather than measured, and they are the two that move the result furthest.

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.

Field	Where the number comes from	The trap
Purchase price	The delivered price including attachments, transport and commissioning — not the headline machine price.	Excluding the head, coupler, tracks or delivery understates the capital that actually has to be recovered.
Expected resale	What a machine of this type, age and hours has recently sold for, verified with a dealer or a recent sale rather than estimated.	Optimistic residuals are the easiest way to make any machine look affordable. The resale market for purpose-built forestry machines is thin, and condition and hours dominate price.
Ownership period	How long you will actually keep it, which should align with the finance term and your replacement cycle.	A period longer than the contract that supports the machine hides the exposure rather than removing it.
Productive hours per year	Contracted or historically achieved productive hours — not machine hours, and not scheduled hours.	This is the single most consequential input. Productive hours exclude travel, setup, breakdowns and waiting, and they are usually well below the figure a contractor first offers.
Fuel burn and price	Measured litres per hour for this machine class in this work, and the price you actually pay delivered.	Brochure consumption figures are measured under conditions that rarely match sustained field load.
Operator cost	Fully loaded hourly cost — wages, on-costs, leave, superannuation, training — not the base rate.	Using the base hourly rate understates operator cost substantially, and the gap grows with the size of the business.
Service, repairs and consumables	Your own records if you have them; a dealer's maintenance schedule costed out if you do not.	Consumables scale with production, not time, and they differ sharply by species and site. Softwood-derived figures will understate hardwood work.
Production per productive hour	Measured output for this machine on this kind of site, averaged across a period long enough to include the bad days.	Using a good hour rather than a sustained average produces a cost per unit that cannot be delivered at, which then gets quoted.

The output

How to read the result

Depreciation per hour

The largest single cost on most forestry machines, and the one that appears on no invoice. It is what you must earn each hour simply to be able to replace the machine.

Total machine cost per hour

What an hour of this machine costs you before any margin. Any rate below this is subsidised by the machine's remaining life.

Cost per unit of saleable production

The number to compare against your contract rate. If the gap between this and your rate does not cover overheads and margin, the rate is wrong or the production assumption is.

Annual machine cost

The total this machine has to earn in a year. Useful as a sanity check against contracted revenue, because it is the figure that has to be covered whether the machine works or not.

Worked example

The same machine at two utilisation levels

1An $800,000 machine kept five years to a $300,000 residual depreciates $500,000 over the period — $100,000 a year.
2At 2,500 productive hours a year, that is $40 per hour in depreciation alone.
3At 1,250 productive hours a year, the same machine carries $80 per hour.

Nothing about the machine changed. Halving the utilisation doubled the fixed component of its hourly cost, and it would do the same to finance, insurance and registration.

This is why contracted hours belong in the purchase decision ahead of specification. A machine that is 10% more productive cannot recover a 50% shortfall in utilisation.

Avoid

Errors that make the answer wrong, not just imprecise

Using machine hours instead of productive hours

Machine hours include idling, travel and waiting. Dividing fixed costs by machine hours produces an hourly rate the machine cannot actually deliver production at, and the error flows straight into the quoted rate.

Assuming a residual you have not verified

Residual value is the difference between depreciation being the largest cost and being merely a large one. It deserves a phone call to a dealer, not an estimate.

Omitting finance cost

Depreciation and finance are separate costs. A model that captures only the first understates the machine's real annual burden, particularly early in a finance term.

Modelling production from a good day

Sustained average production across weeks — including weather, breakdowns and difficult ground — is what the machine will actually deliver. A rate quoted from peak production has no margin in it.

Questions

Common questions about this calculation

Should finance interest be included as a separate cost?

Yes, as part of the fixed annual cost, because depreciation and interest are different things. Depreciation is the loss of the asset's value; interest is what the money costs. A model that captures only depreciation understates the annual burden, and the gap is largest in the early years of a term when interest is highest.

What counts as a productive hour?

An hour in which the machine is producing saleable output. It excludes travel between sites, setup, refuelling, breakdowns, waiting on trucks or other machines, and operator breaks. It is usually well below both scheduled hours and the machine's own hour meter, which is why it is the input most worth measuring rather than estimating.

How do I estimate residual value for a purpose-built forestry machine?

Ask dealers what comparable machines of similar age and hours have recently sold for, and treat that as the basis rather than a percentage rule. The market for these machines is thin, so condition, hours and service history move price more than age does, and unusual specifications narrow the buyer pool further. A verified recent sale is worth more than any depreciation curve.

Does this calculation replace an accountant's depreciation schedule?

No — they answer different questions. Tax depreciation follows statutory rules and is about assessable income. This is a commercial calculation about what an hour of production costs you, which is what a rate has to cover. The two will not match, and using the tax figure to price work will mislead in either direction depending on the schedule.

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