Lifetime Cost of Construction Equipment Ownership Template

Construction Equipment purchases are an investment that needs to be evaluated to determine which purchase is the better va
your business. Equipment performance and capacity to do the job are part of the decision process. However, the single purcha
cost is only one factor in the real lifetime" equipment cost. Any purchase should be evaluated and take into account the loan f
cost for maintenance and repairs, fuel consumption, insurance, and depreciation value to determine your the real lifetime cost
equipment being purchased.

As a guide to help you estimate real lifetime equipment costs before your next equipment purchase, the included "Cost of
Ownership Template" spreadsheet (next sheet) can give you an example on how you can estimate your construction equipme
true cost of ownership. This template breaks all costs into both fixed and variable cost per hour amounts. Fixed cost are your
and depreciation expense whereas variable cost are fuel, tires and maintenance costs.

To use the Cost of Ownership template, you will need to enter your equipment model cost parameters to calculate the true equ
cost of ownership.

The template should be modified with your own values. You can change all the factors in yellow for your own calculations. Whi
are optional. A detailed explanation of the factors used to calculate the cost are given in the sheet "Parameters". Be sure to sa
sheet under a different name to keep your information. Values shown are for example purposes only.

The "Cost of Ownership Template" spreadsheet example breaks the cost down into both variable and fixed cost per hour over
ownership period. With these cost per hour, you can do a best estimate to find the real lifetime cost of ownership of your cons
equipment.

As an example, the Volvo L50E wheel loader has a suggested retail price of $109,712 (see your dealer for exact pricing). Ente
amount as parameter A on the sheet. Tires and rims retail for $4,418. Enter this amount as parameter N. With the other cost
assumptions made and entered in the parameter cells: 5 year ownership (C), 6% loan interest (F), 2000 hrs in use per year (R
$9,484 in annual service (P) are entered in the table, the "Real cost of owning and operating" this equipment is $17.00 per hou
operator cost, and $37.00 per hour with the operator cost included. Therefore, $37.00 per hour is the estimated true cost of ow
based upon the assumptions entered. See the paramers sheet for the explanations of these values.

You can used this template for other equipment in a similar manner to determine the real lifetime cost of ownership to you as a
equipment owner. This template represents one way to determine an estimated "real cost analysis" that is frequently used in t
industry.

Owning and Operating Cost Template version 1.1, January-2006

Conditions: See descriptions below to enter your values

ITEM

Parameters
A
B
C
D
E
F
G
H
I
J
K
L
M
N
O
P
Q
R

Machine Model
Purchase price
Purchase price, excluding tires / Tracks
Depreciation time
Residual value
Depreciation cost ((B-D)/C)
Interest
Interest cost (F x (A+D)/2)
Machine tax
Insurance
Fuel Cost
Fuel Cunsumption
Oil Cost
Oil Consumption
Cost of a Set of Tires / Tracks
Lifetime of Tires / Tracks
Repairs and Maintenance
Operator Cost
Operating Hours

Note: Oil cost can be included as part of repair and maintenance.

Machine Model

1. Fixed Cost per Hour

Depreciation (E/R)
Interest (G/R)
Machine Tax (H/R)
Insurance (I/R)
TOTAL FIXED COST PER HR.

2. Variable Cost per Hour

Fuel (J x K)
Oil, Grease, & Filters (l x m)
Tires / Tracks (n/o)
Repair & Maintenance (P/R)
TOTAL VARIABLE COST PER HR.

3. Fixed + Variable Cost per Hour - Sub Total

4. Operator Cost per Hour (Q/R)
TOTAL COST PER HOUR
Disclaimer:

Units
USD
years
per year
%
per year
per year
per year
per gal
gph
per qt.
qt. per hr.
hours
per year
per year
per year

Volvo Construction Equipment North America, Inc. and its subsidiaries and affiliates (collectively "Volvo CE") hereby disclaims any and all expressed or implied warranties regarding the cost data, the
calculations contained therein, or the appropriateness of equipment used in the analysis, including, without limitation, any warranties of merchantability or fitness for a particular purpose. In no event shall
Volvo CE be liable to the entity for whom the report was created (or any other entity) for any indirect, incidental, consequential, or special damages, including without limitation, lost revenues or profits.

e version 1.1, January-2006

Model Volvo L50E

$
$
$
$
$
$
$
$
$
$
$
$

109,712
105,294
5
43,885
12,282
6%
4,608
2.25
1.30
0.00
4,418
5000
9,484
40,000
2000

Model Volvo L50E

$
$
$
$

6.14
2.30
-

8.44

$
$
$
$

2.93
0.88
4.74

8.55

17.00

20.00

37.00

Note:
You are allowed to change values in cells
which have yellow background. White cells
are optional.
The light blue cells have formula coded in them.
Therefore, making any changes will overwrite
the formulas. Remember to save under
different file name.

The repair and maintenance cost should include

PM and repairs. If you were to use this template
for used equipment, remember to work the repair
and maintenance cost with your service manager.

eby disclaims any and all expressed or implied warranties regarding the cost data, the
on, any warranties of merchantability or fitness for a particular purpose. In no event shall
onsequential, or special damages, including without limitation, lost revenues or profits.

ound. White cells

ormula coded in them.

anges will overwrite

ce cost should include

re to use this template
mber to work the repair
h your service manager.

11
Err:504
Err:504

Lifetime Cost of Ownership Template Parameters - Explained

Letters below refer to the parameters given on the Cost of Ownership Template
A - Purchase price you pay for the equipment.
B - Calculated value from purchase price minus the cost of the tracks/tires. Why do we take out the cost of the tires? Tires
and tracks have a different wear cycle and usually need to be replaced a number of times during the life of your
equipment, therefore it is common practice to include these as a separate cost item.
C - Depreciation time frame, basically the time frame for the cost template to the determine the cost of ownership, usually
how long you will own the equipment.
D - Residual value - the estimated value of the machine at the end of your ownership period. Note: residual value can vary
depending upon condition of the machine (hours used, etc.) after the ownership period.
E - Calculated depreciation cost (calculated purchase price minus the residual value) divided by the time frame. This
computes your depreciation cost per year. Essentially depreciation is the loss in the value of the equipment over time.
F - Annual interest rate on the loan to purchase the equipment.
G - This is the interest cost of the loan. Interest cost is calculated from the averaged amount financed times loan interest
rate, (Purchase Cost + Residual) / 2 * APR. Yes, you add Net Cap Cost and Residual, this is not double-counting as it
appears. It's a simple way of calculating the average amount financed without using complicated cost of money business
formulas. This calculation comes close to the declining balances formula and is widely used in the loan industry.
H - Your annual taxes paid on the machine - this varies by region.
I - Your annual insurance cost for the machine.
J - Estimate cost of fuel per gallon.

K - Fuel consumption (gallons per hour). Fuel consumption figures are usually available in the Product Manuals or the
Manufactures Product Handbook. Fuel consumption can vary depending on how the machine is used. Note: this can be an
important consideration. A machine which is 2 gallons per hour more efficent can, over the life of the machine, save
thousands of dollars in fuel cost. Volvo Construction Equipment have the highest fuel efficency ratings in the industry. Fuel
consumption factors for Volvo products are available in the Volvo Product Manuals or from your local dealer.
L - Estimated cost of a quart of oil, grease and or filters.
M - Oil consumption (quarts per hour) of the machine.
N - Cost of a set of tracks or tires. These are high wear items and need to be included separately for calculating
ownership cost.
O - The expected lifetime (in number of hours) of a set of tracks or tires.
P - Estimated repair and maintenance cost. This can be a significant factor in your equipment cost. Repair and
maintenance costs vary considerability depending on the type of work. Equipment with the lowest repair and maintenance
are cost effective over the life of a machine. Periodic Maintenance Plans are important to keep this cost down. Your
Service Manager is the best source for this type of information. Estimated repair and maintenance costs are sometimes
available from either the manufactures performance handbook, or from the product manuals. Estimated service costs for
Volvo construction equipment are available from your local dealer. Volvo Construction Equipment are engineered for
minimal service requirements offering higher productivity.

Q - Operator cost per year - Operator wages.

R - Operating hours for the machine per year - how many hours you will use the equipment per year.

The Botton Line - A Cost per Hour Ownership Cost

Your equipment costs can be broken down into the following categories: (1) fixed costs such as loan, depreciation,
insurance taxes, etc. and (2) variable costs per hour such as fuel, repair, tires/tracks, etc. The subtotal for these are given
in 3. You can use these costs per hour to determine the real lifetime cost estimate of operating and owning your
equipment.
1. The fixed hourly calculated costs include the depreciation expense, interest cost, tax and insurance.
2. The variable calculated costs incude the fuel, oil & grease, filter costs.
3. Fixed and variable subtotal shows basic purchase and operation costs per hour for the machine.
4. The total hourly cost of owning and operating this equipment includes operator wages. This is your computed hourly
cost per hour for this equipment.
Volvo Construction Equipment have high fuel efficiencies, are designed for reduced maintenance requirements and have
higher productivity.