A guide to calculating plant hire rates
Calculating plant rates is a time consuming process that involves many variables. Whether your company owns it’s own fleet, or is hiring out plant, it is crucial to understand the factors that determine cost.
With the rising costs of fuel, labour and consumables, companies that do not understand these factors may be operating a fleet that is below the return
In this article, we explain the cost structure used to break up the cost items of each plant. It is important to note that every company is different, and will have to adjust their cost structure to suit their specific operation and strategy.
Some examples of varying plant strategies:
- Some companies may decide to run an older vs newer fleet, which impacts maintenance,
- Smaller companies have less overhead, which impacts the overhead spread across the fleet
- All costs are variable, and depend on the economic/local markets
- High rates and low utilisation, vs low rates and high utilisation
- Buying the asset outright vs leveraged
Plant Hire Rates, Cost Structure Breakdown:
The 4 key components to calculating your plant hire rates, can be broken down as follows:
1. Operation Costs (Variable)
- Operator Wages - Base rate, travel allowance, meal allowance, overtime, super, payroll tax, annual leave
- Fuel - Current per liter price
- Maintenance - Anticipated cost of servicing and faults, cost of mechanics
2. Owning Costs (Fixed)
- Machine Depreciation - Average usage life and total capital expenditure cost
- Mortgage Interest - interest rate, loan term and % of asset borrowed
3. Overheads:
- Insurance and Rego - P&I, registration and workers compensation
- Allocator - Base rate, super and annual leave
- Administration - Base rate, super and annual leave
- Rent of Yard - Cost of yard, utilities
- General Expenses - Consumables
- Business Development (if applicable)
4. Inputs:
Once the above costs are accurately broken down, the two remaining inputs are:
- Expected Utilisation - this can be derived from historic data
- Desired profit margin
Combining all this data in one place and creating a spreadsheet that can do the calculation is no quick task. The team at Nomad Suite have put together an indicative plant rates calculator for you to download and tailor to your needs.
DISCLAIMER:
- This is not an accurate machine rates calculator, the data is there for reference only and at your discretion to understand, adjust and interpretate.
- We are not experts and this should not be relied on as an accurate way to calculate your fleet costs, seek professional advice
Nomad Suite builds operations software for the civil engineering and industrial industries. Our easy to use software assist contractors in structuring their information and calculating costs.
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