If you’re comparing equipment costs solely based on repair invoices, you might be making a costly mistake. Many businesses assess their equipment’s operational expenses without considering the most crucial factor—Cost Per Hour (CPH).
Let’s break down why traditional comparisons fail and how incorporating CPH can lead to smarter financial decisions for your business.
The Flawed Way Most Companies Compare Equipment Costs
Imagine you own two different excavators:
- EX_001 – Volvo EX750D (75 Ton Excavator)
- EX_002 – Caterpillar 320D (20 Ton Excavator)
At first glance, you compare their repair costs for 2024:
On the surface, EX_002 appears to be the cheaper option. However, this comparison has three major weaknesses that could mislead decision-makers.
Three Critical Mistakes in Cost Comparisons
1. Ignoring Equipment Capabilities
A larger machine like the EX_001 can:
✅ Dig bigger holes
✅ Scoop double the volume of dirt compared to the smaller EX_002
So, even if EX_001 has a higher repair cost, it also completes work faster and more efficiently.
2. Overlooking the Cost of Larger Components
Larger machines naturally come with bigger and pricier parts, such as:
- Undercarriages
- Buckets
- Higher oil consumption
Simply looking at total repair expenses ignores these critical differences.
3. Not Factoring in Operating Hours
This is the biggest mistake! The total cost should be divided by the hours worked to reveal the true efficiency of each machine.
Why Cost Per Hour (CPH) is the Best Comparison Method
Now, let’s introduce the missing piece—operating hours.
Now, it’s clear that EX_001 is actually cheaper to operate despite its higher repair costs. It provides more value per hour, making it the smarter choice.
The Bottom Line: Make Smarter Equipment Decisions
Next time you’re comparing equipment costs, don’t fall into the total cost trap. Instead, factor in:
✅ Operating hours
✅ Equipment size & efficiency
✅ Long-term productivity
By calculating Cost Per Hour (CPH), you’ll gain a more accurate picture of equipment expenses and make better financial decisions for your business.
Want more expert insights on managing equipment costs? Connect with us on Facebook or LinkedIn and start making smarter investment decisions today! 🚀
