We 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
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?
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