Equipment Cost Recovery Rate
True hourly cost of owning and operating equipment, and the billing rate to charge clients.
Expected resale or trade-in value at end of useful life.
25% is a common starting point for owned equipment billed to clients.
Billing Rate / hour
$30.42
True cost / hour: $24.33
| Annual Depreciation | $10,000.00 |
| Ownership Cost / hr | $10.33 |
| Operating Cost / hr | $14.00 |
| Total Cost / hr | $24.33 |
| Billing Rate / hr | $30.42 |
Formula: annual depreciation = (price − salvage) ÷ life. Ownership/hr = (depreciation + insurance + storage) ÷ annual hours. Operating/hr = fuel + maintenance. Total/hr = ownership + operating. Billing rate = total × (1 + markup/100).
Estimates only. Real recovery depends on utilization, downtime, and the resale market.
Frequently Asked Questions
How do contractors calculate equipment rates?
Two main approaches. First, the published rate-book method: look up the equipment in the AED Green Book, Blue Book, or RS Means and use the published monthly or hourly rate as your billing benchmark. Second, the build-your-own (or cost recovery) method this tool uses: add depreciation, insurance, storage, fuel, and maintenance, divide by realistic annual hours, then mark up for profit. Book rates are useful for change orders and government work; build-your-own is more accurate for your specific utilization and operating cost.
What utilization percentage is realistic?
Most owned construction equipment runs 800 to 1,500 productive hours per year, which is roughly 30% to 60% of available daylight working hours. A skid steer or mini-excavator on a busy crew might hit 1,500 to 1,800 hours, while a specialty piece like a wheel loader used only at the yard might log 400 to 800. If you assume rental-fleet utilization (2,000+ hours) on owner-operated equipment, your hourly cost will look unrealistically low.
When does it make sense to buy versus rent?
A common rule of thumb is the 60% to 70% utilization threshold: if you would use a piece of equipment more than 60% of available working time across a year, owning usually wins on total cost. Below that, renting is cheaper because rental companies spread their fixed cost across many customers. Other factors push toward renting even at high utilization: rapidly improving equipment generations, financing constraints, equipment you only need for one phase of a long project, or specialty equipment your crew is not trained to maintain.
Should I use AED rate book values or build my own?
Use both. The AED Green Book (Associated Equipment Distributors) is the standard reference for change-order pricing on federal, state, and many private contracts, and most owners and GCs will not push back on Green Book rates. Build your own cost-recovery rate to make sure your published rates are actually profitable, to price internal cost transfers between jobs, and to know your floor when negotiating a long-term rental-with-operator deal. The two numbers should be in the same ballpark; if your build-your-own rate is far above the Green Book, your utilization or maintenance assumptions are probably off.