In many cases, farm owners decide to purchase equipment rather than rent it because they have a consistent long-term need for it.
Additionally, the tax benefits that come with owning equipment can be especially lucrative in years when bonus depreciation is available. However, the responsibilities that come with machine ownership can be costly and challenging.
The good news is: By applying total costs to a strategy, machine owners can get more out of their equipment while simultaneously reducing overall expenses.
Outlining all of the costs associated with the equipment can help you pinpoint areas where the strategy can be tailored for improved efficiency and reduced total costs. So before you can apply total ownership costs to a strategy, you must first calculate all of your expenses.
Calculating total ownership costs
The first step in reducing total life cycle costs is to identify which factors affect your specific ownership expenditure. Dairy farm operations tend to put the most hours on their machines in the agriculture industry annually – many running 20-hour days.
Therefore, factors such as idle time, operator accountability, regular maintenance expenses and fuel consumption especially impact total cost of machine ownership for dairy farmers. Other factors to consider when totaling expenses could include:
- Scheduled and unscheduled repairs
- Weather conditions
- Operation location and altitude
- Equipment downtime
- Equipment price
- Resale value
Lowering total ownership costs
Managing idle time – There are several steps you can take to further lower total ownership costs as well as extend the life of your machine. First, let’s start with managing machine idle time, as this is a major concern for many dairy farm owners.
Idle time factors into added fuel costs and puts hours toward the machine warranty; therefore, it can become a significant lifetime ownership cost if not managed well.
It’s a good idea for owners to look for machines that are equipped with features to help manage idle time, such as engine idle shutdown, which comes standard on some of today’s top-tier small wheel loaders.
Engine idle shutdown allows the operator to set the software to shut the engine down after it runs idle for a certain amount of time – ultimately preventing unnecessary idle engine hours and fuel burn.
Lowering operator expenses – Another significant ownership cost is the machine operator. This expense not only factors in operator wages but also operator skill level and accountability. It is beneficial for operation owners to create a culture of accountability among their operators.
An effective method of creating this sort of environment is establishing a rewards program for your fleet operators in order to encourage them to properly maintain and operate the machines as well as practice safety protocols at all times. Mandating and holding regular training sessions is also recommended to help operators stay on top of the latest machine capabilities and safety measures.
Routine maintenance and servicing – Routine maintenance checks and servicing are essential in order to extend the life of your machine as well as help prevent potential repair costs. When spec-ing new machines, owners should consider factors such as how often the machine will need to be serviced and the costs associated with it.
For instance, the emissions systems on most small wheel loaders require the diesel particulate filter to be taken out and serviced by a dealer every 3,000 to 5,000 hours, which costs about $2,500 each time.
With more advanced emissions systems, the diesel particulate filter is designed to last the life of the engine without needing to be changed. This not only increases uptime but can also save owners up to $10,000 throughout the life of the machine.
Lowering fuel consumption – Fuel costs are a headache for any machine owner, across all industries. However, many of today’s advanced machines are being engineered for increased fuel efficiency. For example, small wheel loaders with an intelligent hydrostatic power train allow operators to run the engine in one of two modes: standard or performance.
In standard mode, the engine has a lower maximum speed of 1,600 rpm versus 2,300 rpm, which is the typical maximum speed of the engines most manufacturers install in their small wheel loaders.
Because of this, the engine will burn less than 2.3 gallons of fuel in an hour. Depending on the comparison, this technology can deliver up to 20 to 35 percent in fuel savings over conventional machines.
In performance mode, the maximum engine speed is 1,800 rpm – still significantly lower than most manufacturers’ small wheel loaders. However, the engine power and hydraulic speed are boosted in all speed ranges.
This optimizes machine capabilities for multi-function work and allows operators to get the job done faster while still saving fuel.
Small wheel loaders equipped with hydrostatic power train, low-speed and high-torque engines, and intelligent power management technology can save up to 2,000 gallons of fuel a year (based on 4,000 hours of operation and saving 0.5 gallon per hour).
Ownership factors to consider
As you can see, the total cost of ownership over the lifetime of a machine is dependent upon numerous variables. 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 life cycle.
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 you can exercise your freedom to sell, trade in or keep the equipment for a second life cycle. To maximize the return, it is important to maintain the machine to owning and operating requirements. PD
ILLUSTRATION: Illustration by Corey Lewis.
- Agriculture Segment Manager
- Caterpillar Inc.
- Email Dustin Johansen