Why equipment costs destroy quote profitability
This equipment rate calculator helps contractors estimate the true hourly cost of machinery such as excavators, vans, trailers and specialist tools.
The calculation considers ownership costs, operating costs and realistic utilisation to estimate the break-even hourly rate required to cover the cost of the equipment.
Once calculated, these rates can be used inside RateCheck when building quotes to ensure equipment costs are properly accounted for.
Owned equipment is not free. A machine that cost £30,000 and lasts 5,000 working hours has a depreciation cost of £6 per hour before fuel, maintenance or insurance are added.
What costs make up an equipment rate
- Depreciation — purchase price divided by expected working life in hours or years
- Maintenance and servicing — scheduled services, filters, wear parts, repairs
- Fuel or power — diesel, petrol, electricity or hydraulic fluid consumed per hour
- Insurance — annual premium spread across billable hours
- Registration and compliance — road tax, LOLER inspections, certifications
- Finance charges — interest on any HP or finance agreement
- Storage and transport — yard costs, trailer wear, transport to site
How to calculate your equipment rate — step by step
- Find the purchase price and expected life. Use the price you paid (or current replacement value) and estimate how many hours or years the machine will last before needing replacement.
- Calculate annual depreciation. Divide the purchase price by the expected life in years. This is the minimum you must recover each year just to replace the machine.
- Add all running costs. Include annual fuel, maintenance, servicing, insurance, road tax, finance interest, and any other regular costs specific to that machine.
- Estimate billable hours. Work out how many hours per year the equipment is actually on a job and earning. Subtract idle time, travel, maintenance downtime and seasonal gaps.
- Divide total annual cost by billable hours. This is your minimum hourly equipment rate — the amount you must charge per hour to break even on that machine.
- Add the rate to every quote that uses the equipment. Multiply the hourly rate by the expected hours on the job and include it in your job costs before setting the price.
How RateCheck handles equipment costs in quotes
Once you have set up an equipment rate in RateCheck, it is available to add to any job with a single tap. Enter the expected hours, and RateCheck calculates the equipment cost automatically and includes it in the profitability check.
Every quote is then tested against your sustainable rate — showing you whether the job covers your labour, materials, equipment, overhead and a profit margin before you send the price to the client.
Equipment costs are one of the most common hidden losses in contractor quoting. Getting this number right once means every future quote that uses that machine is automatically correct.
Common equipment costing mistakes
- Treating owned equipment as having zero cost because it is "already paid for"
- Using a hire rate as a proxy for owned equipment cost without checking whether it reflects real depreciation
- Forgetting that maintenance costs increase significantly as equipment ages
- Not accounting for idle time — equipment that works 600 hours a year has a much higher cost per hour than one working 1,200 hours
- Leaving equipment costs out of fixed-price quotes while including them in day rate estimates
Frequently asked questions
How do I calculate the hourly cost of equipment?
Add up the annual depreciation, maintenance, fuel, insurance and finance costs for the machine. Divide by the number of hours per year the equipment is actually on billable jobs. The result is the minimum hourly rate you must recover on every job it is used for.
Should I include depreciation in my equipment rate?
Yes. Depreciation is one of the largest equipment costs and the most commonly ignored. If you do not recover depreciation through your quotes, you will eventually need to replace the machine with money you do not have. Divide the purchase price by the expected working life in hours to get a per-hour depreciation figure.
What is a typical equipment utilisation rate?
Most contractor-owned equipment is billable for 40–60% of available working hours once idle time, maintenance, transport and seasonal gaps are accounted for. Using a realistic utilisation figure is critical — overestimating billable hours makes the hourly cost appear lower than it really is.
How is an equipment rate different from a hire rate?
A hire rate from a rental company includes their depreciation, maintenance, insurance, profit margin and fleet management overhead. Your owned equipment rate should cover the same categories but calculated against your actual purchase price and real running costs, which may be higher or lower than the hire market rate.
Can I use this for vehicles as well as machinery?
Yes. The same calculation applies to any asset that wears out and costs money to run — vans, trucks, excavators, generators, pumps, and specialist tools. Any asset with a meaningful purchase cost and running expenses should have a calculated rate.
Add equipment costs to your quotes
Calculate your equipment rate and use it in every job. RateCheck checks the full profitability before you send the price.
Start Equipment Rate Calculator →Test a quote →