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What a machine really costs per hour

Owning and operating cost per hour for a skid steer, loader or excavator: depreciation, interest, insurance, fuel and repairs, worked through for one machine.

Practical guide

By Steven Michael Barber · Published October 10, 2026 · 5 min read

It is easy to think of what a skid steer or excavator costs to run as its fuel bill. Fuel is the cost you see every week, but it is usually well under half of what the machine really costs per hour once you count the money it loses in value, the insurance you pay whether it runs or not, and the repairs that come due later. If your rates only cover the fuel, the shortfall shows up years later, when the machine is worn out and there is no money set aside to replace it. This guide splits the hourly cost into its parts, the way equipment cost handbooks do, and works one machine through from start to finish.

Owning costs and operating costs

Equipment cost methods, such as the owning and operating cost section of the Caterpillar Performance Handbook and the U.S. Army Corps of Engineers equipment cost schedule (EP 1110-1-8), divide the cost of a machine into two groups:

• Owning costs are what you pay for having the machine at all: depreciation, interest on the money tied up in it, insurance, registration and storage. Most of them accrue by the calendar, not by the hour, so they get more expensive per hour the less you use the machine.
• Operating costs are what you pay because it runs: fuel, lubricants, filters, repairs, tires or tracks, and wear parts. They track hours of use closely.

The operator's wage is a third, separate line. Keep it apart from the machine cost so you can price the machine with or without your own labor.

The method, line by line

Our equipment cost per hour calculator uses a simplified version of those handbook methods:

• Depreciation per hour = (purchase price − expected resale value) ÷ useful life in operating hours. This is straight-line depreciation by hours, which spreads the loss in value evenly over the hours you expect to run the machine before you sell it.
• Insurance and fixed costs per hour = yearly insurance, registration and storage ÷ operating hours per year.
• Fuel per hour = fuel burn per hour × fuel price.
• Maintenance and repairs per hour is your own estimate, ideally from service records.
• Owning cost = depreciation + insurance and fixed costs.
• Operating cost = fuel + maintenance and repairs.
• Machine cost per hour = owning + operating, plus the operator's wage if you enter one.

The calculator does not include interest on the money tied up in the machine as a separate line. Below is a simple way to add it.

Worked example: a compact track loader

Here are the inputs for a used compact track loader. They are illustrative figures, not a quote for any particular model:

Step by step:

1. Depreciation: ($72,000 − $28,000) ÷ 6,000 h = $44,000 ÷ 6,000 = $7.33/h.
2. Insurance and fixed costs: $2,400 ÷ 750 h = $3.20/h.
3. Owning cost: $7.33 + $3.20 = $10.53/h.
4. Fuel: 3.2 gal/h × $3.85 = $12.32/h (about 12.1 liters per hour).
5. Maintenance and repairs: $9.50/h.
6. Operating cost: $12.32 + $9.50 = $21.82/h.
7. Machine cost per hour: $10.53 + $21.82 = $32.35/h.

Fuel is $12.32 of the $32.35, about 38 percent. An owner who priced the machine on fuel alone would be short by about $20 for every hour it runs.

At 750 hours a year, the 6,000-hour life works out to 8 years. If you also pay an operator $32 per hour including payroll costs, the total becomes $32.35 + $32.00 = $64.35 per hour.

Adding interest on the investment

Money spent on a machine cannot earn interest elsewhere, and money borrowed to buy one costs interest. Handbook methods include this as an owning cost. A simple approximation charges interest on the machine's average value over its life, taken as the midpoint between purchase price and resale value:

1. Average value: ($72,000 + $28,000) ÷ 2 = $50,000.
2. Yearly interest at 7 percent: $50,000 × 0.07 = $3,500.
3. Per hour: $3,500 ÷ 750 h ≈ $4.67/h.

Use your loan rate if you financed the machine, or what your cash would otherwise earn if you paid outright. The 7 percent here is only an example.

Because interest is a yearly cost spread over yearly hours, just like insurance, you can fold it into the calculator by adding it to the yearly fixed costs: $2,400 + $3,500 = $5,900 per year. The fixed line becomes $5,900 ÷ 750 = $7.87/h, owning cost rises to $15.20/h, and the machine cost becomes $37.02/h.

Why hours per year matter so much

Run the same loader 500 hours a year instead of 750, keeping everything else the same:

• Depreciation stays at $7.33/h, because the method spreads it over life hours, not years.
• Fixed costs rise to $2,400 ÷ 500 = $4.80/h, and the machine cost becomes $33.95/h.
• With the $3,500 of yearly interest folded in, fixed costs are $5,900 ÷ 500 = $11.80/h and the machine cost is $40.95/h.

The 6,000-hour life now stretches over 12 years, which raises a fair question: will the machine really be worth $28,000 after 12 years instead of 8? Resale value depends on age as well as hours, so a machine that sits more should usually get a lower resale estimate. The method only gives a sensible answer if the inputs agree with each other.

Getting the inputs right

• Resale value. Look at auction results and dealer listings for the same model at the age and hours you expect to sell. Lowering the resale value raises depreciation dollar for dollar.
• Fuel burn. Divide fuel added by hours run between fill-ups, over a few weeks of normal work. Burn varies a lot with the kind of work.
• Repairs. Repairs rise as a machine ages. An average over the whole life is more honest than this year's bill on a new machine. If you track tires, tracks and wear parts separately, include them here.
• Hours per year. Use metered hours, not hours on the job site. A machine that is on site all day but runs for four hours has four hours to spread its costs over.

Cost is not the rate you charge

The figure from this method is what the machine costs you. A charge-out rate or a bid also has to cover company overhead that is not tied to one machine, time spent moving between jobs, and a profit margin. Our job costing guide shows how the machine rate fits into a full job price.

The depreciation here is an economic estimate for pricing. Depreciation for income taxes follows different rules, so this is not tax or accounting advice.