Construction equipment is getting more expensive. As of early 2025, construction machinery and equipment prices are up 0.3% from just a month ago and 0.8% higher than at the start of 2024.
Equipment costs have jumped more than 30% since early 2020. If you don’t estimate equipment costs accurately, you risk major budget overruns and a loss of profit.
In this article, we’ll break down how to estimate construction equipment costs effectively—step by step.
Importance of Estimating Construction Equipment Costs
Here are the key impacts of accurate (or inaccurate) equipment cost estimation on project outcomes:
Project Budgeting and Profitability
If you underestimate equipment costs, you could wipe out your profit or take a loss on the entire job. A study of large construction jobs found that 98% of construction projects ran over budget, often due to underestimated costs. Equipment plays a big role in that.
Project Planning & Scheduling
When you know how much each machine costs to run, you can schedule jobs to keep costs under control.
For example, if the estimate shows a specific piece of equipment is expensive, the project manager might adjust the schedule to limit how long that machine sits unused. Or, they might plan tasks so that multiple crews can use the same equipment back-to-back instead of renting two of the same machines.
Using modern construction project tracking tools, contractors can monitor equipment usage, schedule conflicts, and on-site productivity to keep costs aligned with estimates.
Risk Management
Equipment cost uncertainty is a risk factor that can be mitigated by sound estimating. For example, if your estimate flags that fuel will be a significant cost, you might include a contract clause for fuel price escalation or allocate a contingency allowance. Accurate estimates also prevent “surprise” costs from derailing a project.
Competitive Advantage
Contractors who consistently estimate equipment costs well can bid smarter. They know their real costs and don’t have to guess.
Different Types of Equipment Costs
Construction equipment costs are usually split into two main categories: Ownership Costs and Operating Costs.
Ownership (Fixed) Costs
Ownership costs are what you pay just to have the equipment in your fleet. These costs don’t change based on how much you use the machine. Whether the equipment is on a job site or in the yard, they’re ongoing.
Depreciation
Depreciation is the loss in value of equipment over time. For example, a $200,000 wheel loader with a useful life of 8 years and an expected salvage value of $25,000 would depreciate by about $21,875 per year using straight-line depreciation. That’s around 10–11% of its original cost per year.
Some construction companies prefer straight-line depreciation for simplicity. Others use hour-based depreciation, especially when the machine isn’t used year-round.
Formula:
(Purchase Price – Salvage Value) ÷ Useful Life (in years)
Interest (Cost of Capital)
Owning equipment ties up money, whether you financed it or paid cash. That money has a cost—either interest on a loan or what it could have earned elsewhere.
For example, say you buy a $120,000 skid steer; its average value over the year is $90,000. If your cost of capital is 7%, the interest cost would be about $6,300 per year.
You should use your actual loan interest rate if you financed the purchase. If not, many contractors use an estimated 5% and 8% rate to reflect the opportunity cost.
Formula:
(Average Annual Equipment Value) × (Interest Rate)
Insurance
Annual insurance costs usually run between 1% and 5% of the machine’s value. Rates depend on the equipment type, your location, security setup, and past claims. For example, insuring a $100,000 dozer might cost $1,000 to $5,000 annually.
Taxes and Fees
Many states and local governments charge property taxes or registration fees on owned equipment. These are often based on the machine’s book value. A 2% to 5% annual tax rate is common. If your excavator is valued at $60,000, you owe $1,200 to $3,000 per year in taxes.
Formula:
(Equipment Book Value) × (Tax Rate)
Storage and Facilities
Secure and weather-protected storage for large machines can cost $500 to $1,000 per month, which is $6,000 to $12,000 per year just to keep it parked safely.
Other Ownership Costs
There are a few extra costs that come with owning equipment. These can include:
- Licensing fees: Especially for equipment that operates on public roads or requires special permits.
- Telematics subscriptions: GPS tracking or fleet monitoring.
- Software costs: For equipment management platforms.
Operating (Variable) Costs
Operational costs depend on how much and how often you use the equipment. These are the day-to-day project expenses related directly to making machines work.
Fuel (and Fluids)
A mid-sized bulldozer can use around 5 to 8 gallons of diesel per hour. At $4 per gallon, that’s a $20–$32 hourly rate, or $200–$320 per 10-hour day. You’ll also need to factor in costs for engine oil, hydraulic fluid, DEF, and coolant.
Maintenance Costs & Routine Service
Preventive maintenance keeps your equipment running and helps avoid costly breakdowns. On average, a machine used regularly can cost $4,000 to $6,000 per year. This includes oil changes, filter replacements, inspections, and minor servicing.
Repairs & Spare Parts
Repair costs are less predictable but can hit hard. A blown hydraulic pump, engine overhaul, or track replacement can cost thousands of dollars. Even regular wear-and-tear parts—like tires, belts, and filters—add up over time.
Electric Power (if applicable)
For electric models, you’ll need to estimate electricity usage instead of fuel use. Power needs vary, and costs depend on local electricity rates.
Formula:
(kWh Used per Charge) × (Cost per kWh)
Operator Wages
The labor cost varies by region, but a skilled heavy equipment operator might earn $30–$50 per hour, plus payroll taxes and benefits. If a machine needs two operators or a spotter, the hourly wages increase accordingly.
To illustrate, imagine a construction contractor who owns a backhoe loader valued at $100,000. They estimate the backhoe will be used 800 hours per year. A simplified annual cost breakdown might look like this:
| Cost Component | Annual Cost (USD) | Per Hour (USD) |
| Depreciation (straight-line, 8-year life, 10% salvage) | $11,250 | $14.06/hr |
| Interest on investment (5% of avg value) | $4,000 | $5.00/hr |
| Insurance & Taxes (say 3% of value) | $3,000 | $3.75/hr |
| Total Ownership Cost | $18,250 | $22.81/hr |
| Fuel (4 gal/hr @ $4/gal = $16/hr) | $12,800 | $16.00/hr |
| Maintenance (5% of value per year) | $5,000 | $6.25/hr |
| Repair reserve (additional 5% of value) | $5,000 | $6.25/hr |
| Total Operating Cost | $22,800 | $28.50/hr |
| Combined Cost (no operator) | $41,050 | $51.31/hr |
Equipment Ownership vs. Rental vs. Leasing
Many large contractors use a mix: they own core equipment, lease some for medium-term needs, and rent to fill immediate short-term gaps. Each option has trade-offs in cost, flexibility, and risk.
Ownership (Buy)
You take full control when you buy equipment (usually with financing). Ownership works best when you use the machine frequently and long-term. Your cost per hour drops the more you use it since you spread the fixed costs (like depreciation and insurance) across many projects.
Pros:
- Lower long-term cost if used heavily
- Full control over equipment use
- Can recover value by reselling later
Cons:
- High upfront cost or loan commitment
- You’re responsible for maintenance and repairs
- Equipment can sit idle between jobs
- Risk of the machine becoming outdated
Rental
Renting gives you access to equipment without the initial purchase price. The rental rate includes ownership costs—depreciation, insurance, and basic maintenance. You only pay for fuel, the rental fee, and small extras like wearing parts or cleaning.
Pros:
- No long-term commitment
- Good for short-term or seasonal needs
- No additional costs for major repairs
Cons:
- It is more expensive per hour/day than the ownership
- Availability might be limited during busy seasons
- It can get costly on long-duration projects
Leasing
Leasing is a middle option. You get the equipment for a longer period (1 to 5 years) with fixed monthly payments. There are two main lease types:
- Capital lease: like a loan, with ownership at the end
- Operating lease: like a long-term rental, with return at the end
Pros:
- Lower monthly payments than rental
- Little to no down payment
- Predictable costs over time
Cons:
- Higher total cost than buying if used heavily
- Less flexibility than renting
- May be locked into a contract even if the job needs to change
Steps to Estimate Equipment Costs
Follow these steps and best practices to build accurate and reliable equipment cost estimates for your construction projects:
1. List Equipment Requirements
Start by listing every piece of equipment needed (excavators, loaders, cranes, trucks, etc). For each item, estimate how many days, weeks, or total hours it will be used. Be specific by task and phase of the project to avoid surprises later.
2. Choose Ownership vs. Rental
Decide for each machine if you’ll use your own equipment, rent, or lease. This decision affects how you calculate costs. Owned equipment needs to be fixed, and variable costs are included. Rented equipment needs daily or weekly rates plus fuel and any additional fees.
3. Gather Cost Data
Collect up-to-date cost information:
- For owned machines: depreciation, fuel use, maintenance, repairs, insurance, storage, etc.
- For rentals: rental rates, fuel costs, potential overage charges, cleaning fees, etc.
- For leased units: lease payment schedule, usage limits, and any service responsibilities
If available, use your own historical data or get quotes from vendors and rental companies. The more specific your data, the better your estimate will be.
4. Calculate Ownership and Operating Costs
Break each equipment cost into ownership (fixed) and operating (variable).
- Ownership costs: Includes depreciation, insurance, property tax, storage, interest (if financed), and any licensing or software fees. These costs happen no matter how much the machine is used, so you’ll typically calculate them monthly or yearly and then convert them to cost per hour based on expected usage.
- Operating costs: Includes fuel, routine maintenance, repairs, fluids, and operator wages. These are tied directly to how much you use the equipment, so calculate them as a cost per hour or per day. Use past job data or manufacturer estimates for fuel burn rates, service intervals, and typical repair patterns.
5. Review and Adjust
Go back through your numbers to double-check for gaps. Did you forget transport fees, setup time, or operator costs? Review your assumptions and adjust them if needed.
Get Visibility on Your Equipment Costs with Anterra
Accurate equipment cost estimation is the foundation of strong project performance and healthy profit margins. But tracking all of that can get messy fast if you’re stuck in spreadsheets.
Anterra’s statement builder and construction dashboards bring everything into focus. With customizable reports tailored for construction teams, you can:
- See true job margins, equipment impacts, and cost overruns in real time.
- Track and manage KPIs like EBITDA and OPEX from one clean interface.
- Drill down to the exact transactions that drive your equipment costs.
With all those features, Anterra helps you turn raw financial data into clear, actionable insight.
Book a demo with Anterra today and see how it simplifies cost control across your projects.
FAQs
How often should I update equipment cost estimates?
You should review and update your estimates before every new project, especially if fuel prices, rental rates, or wage costs have changed. For owned equipment, update annually to reflect depreciation and changes in operating expenses.
Should I include downtime in my estimate?
Yes—build buffer time and contingency costs to account for breakdowns, weather delays, or site issues. Downtime raises costs like operator wages, rental days, or schedule impacts.
How can I simplify cost tracking across a large fleet?
Use a financial tool like Anterra to consolidate equipment costs, usage data, and project budgets in one place. It gives a clear, drillable view from high-level KPIs to individual machine transactions.