Analyzing Your Total Ownership Costs

by New member Scott_Sterton on ‎09-15-2014 01:52 PM

JN1_9287.jpgWe find that customers often desire the advantages of machine ownership because the tax benefits can be especially lucrative in years where bonus depreciation is available. On the other hand, the responsibilities that come with machine ownership can be overwhelming, costly and challenging. The good news is that by applying total costs to strategy, machine owners can get more out of their equipment while reducing overall expenses at the same time.


Outlining all of the costs associated with the equipment can help machine owners pinpoint areas where the strategy can be tailored for improved efficiency and reduced total costs. For instance, costs related to fuel consumption are affected by a number of factors. Therefore, analyzing fuel costs from a recent project and comparing them to similar projects done in the past could expose something like reduced productivity or differences in completion times. The amount of productivity and the speed in which a task is finished directly affect fuel usage. Further investigation could uncover the reason behind the extra fuel consumption giving machine owners an opportunity to tailor their business plans.


These variations can be substantial or miniscule, and the key to capitalizing on them depends upon how quickly they’re found. Before machine owners can apply total ownership costs to strategy, they must first calculate all of their expenses.


Calculating Total Ownership Costs


The first step in reducing total lifecycle costs is to identify which factors affect your specific ownership expenditure. Things like country currency exchange, application, location, altitude, weather conditions, dealer support and machine configuration all affect total costs, so it’s important to track each item in detail. Other factors to consider when totaling expenses could include:

  • Scheduled and unscheduled repairs
  • Fuel consumption
  • Downtime
  • Equipment price
  • Insurance
  • Operator expense
  • Resale value
  • Interest

As you can see, the total cost of ownership over the lifetime of a machine is dependent upon numerous variables. Therefore, working one-on-one with a dealer representative is the best way to estimate a total cost that truly reflects your specific situation. Additionally, installing fleet tracking software can help monitor utilization and machine conditions allowing machine owners to maximize performance through the lifecycle.

Once the total costs associated with the machine are calculated, the sum can be divided by the total number of usage hours to calculate total cost of ownership per hour. This is where machine owners can exercise their freedom to sell, trade in or keep the equipment for a second lifecycle. To maximize the return, it is important to maintain the machine to owning and operating requirements.  


Protect Your Investment

Machine owners are encouraged to obtain additional protection to avoid unforeseen expenses. Extended coverage safeguards machine investments beyond the standard factory warranty period by transferring costs related to unexpected repairs for reimbursement. Equipment Protection Plans reduce the costs related to unexpected repairs, including parts and labor, to safeguard against failures caused by defects in material and workmanship.


Visit our website to view Caterpillar’s extended protection plans, or contact your local Cat dealer for more information.


We’d like to hear from you. Tell us about your experiences with total ownership costs.

  • How have you applied total ownership costs to your business strategy?
  • What other ways can machine owners reduce total costs?
  • With the increasing fuel costs, what have you done to reduce this significant expense?
  • What tracking programs do you use to help monitor machine health?
  • Experienced operators are important, how do you ensure they are maximizing the performance of the machine?
  • How have you determined which protection plan makes the most sense for your machine?

by New member mikelorry
on ‎11-15-2014 11:56 AM

thank you for making a concise article that proves me your good time I will follow the subject loan and I nhésiterai not to intervene if it seems to be bad thank you

by MRPEasy
on ‎05-03-2015 03:14 PM

Is there any software that help to better plan equipment amortisation and ownership costs. Software, that would take all possible factors you mentioned into consideration?

by New member Scott_Sterton
on ‎05-12-2015 01:29 PM


Yes, Caterpillar has developed a sales presentation tool called “value estimating tool” VET. Value estimating incorporates the ownership variables to analyze life cycle costs. Please contact your local dealer sales representative to assist in determining your Cat machines’ total cost of ownership.

by kartini jati
on ‎10-25-2016 11:42 PM

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by klg
on ‎01-28-2017 03:18 PM

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obat pembesar **bleep**

klg asli

thor hammer

on ‎01-29-2017 12:47 PM

Esiste un software che aiutano a migliorare i costi di attrezzature piano di ammortamento e di proprietà. Software, che avrebbe preso tutti i possibili fattori che hai citato in considerazione

by New member KatanaMRP
on ‎11-14-2017 04:38 AM

How would it be possible to access your mentioned “value estimating tool” VET? 

Best regards

by New member Renado
on ‎03-14-2018 07:08 AM

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by New member carlm21
on ‎07-09-2018 06:39 AM

good one

by Visitor Obbyaak
on ‎07-26-2018 09:45 AM

Talking about any vehicle, you definitely should consider insurance cost while analysing total costs. Every owner of a car just needs to have a general insurance quote, so if something happens with the car, it won't be a problem for you.

About the Author
  • I’m an Attachments Product Application & Sales Support Specialist for Caterpillar in North America. I have been with Caterpillar for five years including roles in the field as a dealer sales support representative and marketing support in the skid steer and small wheel loader product groups. I graduated from Iowa State University with degrees in Agricultural Business and Economics. Our goal is to provide a full portfolio of attachments for our customers to be more productive and versatile with their machines.
  • I am an Industry and Application Rep for Caterpillar. I graduated from NC State with a dual degree in Agriculture Business Management and Agriculture Science, concentrating in Leadership and Environmental Technologies. I focus primarily on the relationships between customers, dealers, and the product specialists for the Building Construction Products division. Growing up on a tobacco and beef cattle farm, I have several years of machine operation experience and agricultural knowledge. Thomas Jefferson said it best in that, "Agriculture is our wisest pursuit, because it will in the end contribute most to real wealth, good morals, and happiness."
  • My passion is in storytelling and thought leadership, helping people connect with the brands they love and helping brands connect with their audiences. At Caterpillar, I get to work with a variety of industries and customer solutions, supporting our customers who are making huge impacts in our world every day. It's not just about the yellow iron - it's about understanding the problems our customers face, and being a part of the total solution.
  • I’m a Compact Wheel Loader Product Application Specialist for Caterpillar in North America. I have 11 years of experience, including roles in the field as a dealer technical support representative, and as a distributor business model consultant.  I graduated from North Carolina State University with a Mechanical Engineering Degree, and wanted a job where I didn't have to sit in front of a computer all day.  This job allows me to get out and get my hands dirty, with the goal of providing solutions to customers’ machine needs.
  • I am a Marketing Communications Specialist for Caterpillar with over twelve years of experience marketing the Cat brand to customers in Latin and North America. My goal is to arm customers with the information needed to make well informed purchase decisions; to maximize the value of Cat machines by using an array of Cat Work Tool attachments; and to minimize the total cost of ownership by using Cat parts and Cat Dealer service.
  • I am an expert Operator and Application Specialist for Caterpillar concentrating on products used in the construction trades industry. I operate, evaluate and train on Cat machines and Work Tool Attachments worldwide. I have a Degree in Agricultural Engineering, Craftsman Certified and was named Apprentice of the Year 1981 at the University of East Anglia, UK.
  • I am the National Association Manager for Caterpillar and have responsibility for customer associations and partnerships in multiple industries for Caterpillar. I have 12 years of experience at Caterpillar, and have spent most of those years in the field with dealers and customers around North America. I have always had a passion for equipment and find myself fortunate to be able to work with dealers and customers almost every day.
  • I am a Product Application Specialist with 16 years of experience in the industry. As a Building Construction Products Global Trainer, I focus on training dealers and customers on machines, attachments and applications as it relates to the construction, agriculture and landscaping segments.
  • I have been with Caterpillar for more than eight years, working in various roles including a materials engineer, a filters product manager and my current position as a parts consultant. My job allows me the opportunity to work with Cat dealers and customers providing insight on how the use of quality filters and fluids results in better equipment performance and lower owning and operating costs.
  • I am a marketing and sales support professional for Caterpillar. In this role, I work with our marketing and customer service teams to support or dealers and customers, concentrating on our Small Wheel Loader, Skid Steer Loader, Mini Excavator and Dozer product groups. The exchange of ideas, information and opinions about equipment and how it’s used in various industries on forums such as this blog helps me fulfill my role at Caterpillar to the best of my ability.
  • I am the commercial/market consulting expert for all Caterpillar tires and rims with 14 years of experience. I provide guidance in the harsher work environments of mining and industrial/waste applications. Our goal is to turn our dealers and customers into knowledgeable and trusted resources with respect to tires and rims. Our group offers training, technical support and resources to develop a level of expertise within the Caterpillar value stream that is ordinarily reserved for tire companies and local tire service providers. Ultimately, we want to provide our customers with a total Cat solution from the ground up.
  • I am a Sales Support Manager for Cat Financial and have responsibility for ensuring that the right financial products are available to Cat customers who purchase, lease or rent to own. 8 of my 10 years with Caterpillar Financial have allowed customer and/or dealer interaction as part of my daily responsibilities including over 3.5 years as a Territory Manager. I take personal satisfaction in finding financial solutions that work for our customers and CAT dealers.
  • I’m a Telehandler Product Application Specialist for Caterpillar in North and South America. I have 13 years of experience, including roles in the field as a dealer service operations and technical support representative, and as a distributor business model consultant. My telehandler passion and focus is working with dealers and customers to maximize the versatility of the product through machine and operator training.
  • I am a Product and Application Specialist with over 35 years experience at Caterpillar. I focus on helping you to determine the best Cat machines, work tool attachments, and services for you to use in the building and general construction, landscaping, specialty trades, and agricultural industries.
  • I am a Senior Regional Insurance Marketing Manager with 16 years’ experience at Caterpillar Financial Insurance Services. I have the opportunity to work with 18 North American dealers providing risk management products and services that helps the Caterpillar Enterprise ( Caterpillar, Dealers and Customers) manage their business risk. Caterpillar Financial Insurance Services offers Extended Protection Plans for machines and engines, Physical Damage Insurance, Inventory Protection Plans, Dealer Property and Casualty, Risk Management, Marine Transit Insurance and Dealer Bonds.
  • Jeff Brown is a marketing professional for Caterpillar Skid Steer, Multi Terrain and Compact Track Loaders. Over Jeff's 12 years in the industry, he has visited with and studied the needs of customers across landscaping, construction, and agriculture segments. Delivering innovative solutions that solve customer's problems is Jeff's main focus.
  • I am a North American Product and Application Specialist for Caterpillar. In this role, I have had the opportunity to represent Caterpillar at various trade shows and train customers on new Small Wheel Loader content. I graduated from Purdue University in 2001 with a Mechanical Engineering degree and have spent the past 15 years with Caterpillar in various engineering roles. Growing up in the Mid-West, I have always loved the cold and the unique activities winter enables. Unfortunately, I had to give those up when I moved to North Carolina. I don't care what people say, you never get used to a hot climate.
  • I am a Filter and Fluid Marketing Consultant with over 14 years experience working at Caterpillar. My focus is to ensure customers understand the importance of using superior filtration and lubrication products in their equipment.
  • I am a Sales Support Manager with over nine years of experience in a variety of roles with Caterpillar Financial Services Corporation. Throughout my career, I have had the opportunity to gain experience in matching financial products and tailoring funding strategies to the specific needs of customers. This includes more than three years as a Territory Manager in Seattle partnered with N C Machinery, an authorized Cat dealer covering the states of Washington and Alaska.

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