This is the period over which the equipment can operate at an acceptable operating cost and productivity. The economic life is generally measured in terms of years, hours, or in the case of trucks and trailers in terms of kilometers. It depends upon a variety of factors, including physical deterioration, technological obsolescence or changing economic conditions. Physical deterioration can arise from factors such as corrosion, chemical decomposition, or by wear and tear due to abrasion, shock and impact. These may result from normal and proper usage, abusive and improper usage, age, inadequate or lack of maintenance, or severe environmental conditions. Changing economic conditions such as fuel prices, tax investment incentives, and the rate of interest can also affect the economic life of equipment. Since the lives are given in terms of operating hours, the life in years is obtained by working backwards by defining the number of working days per year and the estimated number of working hours per day. For equipment that works very few hours per day, the derived equipment lives may be very long and local conditions should be checked for the reasonableness of the estimate.

This is defined as the price that equipment can be sold for at the time of its disposal. Used equipment rates vary widely throughout the world. However, in any given used equipment market, factors which have the greatest effect on resale or trade-in value are the number of hours on the machine at the time of resale or trade-in, the type of jobs and operating conditions under which it worked, and the physical condition of the machine. Whatever the variables, however, the decline in value is greater in the first year than the second, greater the second year than the third, etc. The shorter the work life of the machine, the higher the percentage of value lost in a year. In agricultural tractors for example, as a general rule 40 to 50 percent of the value of the machine will be lost in the first quarter of the machine’s life and by the halfway point of lifetime, from 70 to 75 percent of the value will be lost. The salvage value is often estimated as 10 to 20 percent of the initial purchase price.

The objective of the depreciation charge is to recognize the decline of value of the machine as it is working at a specific task. This may differ from the accountant’s depreciation schedule-which is chosen to maximize profit through the advantages of various types of tax laws and follows accounting convention. A common example of this difference is seen where equipment is still working many years after it was “written off” or has zero “book value”.Depreciation schedules vary from the simplest approach, which is a straight line decline in value, to more sophisticated techniques which recognize the changing rate of value loss over time. The formula for the annual depreciation charge using the assumption of straight line decline in value isD = (P’ – S)/Nwhere P’ is the initial purchase price less the cost of tires, wire rope, or other parts which are subjected to the greatest rate of wear and can be easily replaced without effect upon the general mechanical condition of the machine.

The machine rate is usually, but not always, divided into fixed costs, operating costs, and labor costs. For certain cash flow analyses only items which represent a cash flow are included. Certain fixed costs, including depreciation and sometimes interest charges, are omitted if they do not represent a cash payment. In this manual, all fixed costs discussed below are included. For some analyses, labor costs are not included in the machine rate. Instead, fixed and operating costs are calculated. Labor costs are then added separately. This is sometimes done in situations where the labor associated with the equipment works a different number of hours from the equipment. In this paper, labor is included in the calculation of the machine rate.

Fixed Costs are those which can be predetermined as accumulating with the passage of time, rather than with the rate of work. They do not stop when the work stops and must be spread over the hours of work during the year. Commonly included in fixed costs are equipment depreciation, interest on investment, taxes, and storage, and insurance.

Operating Costs vary directly with the rate of work. These costs include the costs of fuel, lubricants, tires, equipment maintenance and repairs.

The unit cost of logging or road construction is essentially derived by dividing cost by production. In its simplest case, if you rented a tractor with operator for $60 per hour – including all fuel and other costs – and you excavated 100 cubic meters per hour, your unit cost for excavation would be $0.60 per cubic meter. The hourly cost of the tractor with operator is called the machine rate. In cases where the machine and the elements of production are not rented, a calculation of the owning and operating costs is necessary to derive the machine rate. The objective in developing a machine rate should be to arrive at a figure that, as nearly as possible, represents the cost of the work done under the operating conditions encountered and the accounting system in use. Most manufacturers of machinery supply data for the cost of owning and operating their equipment that will serve as the basis of machine rates. However, such data usually need modification to meet specific conditions of operation, and many owners of equipment will prefer to prepare their own rates.

4. Put Your Toys Away While performing regular maintenance checks is an active way of preventing damage to your equipment, properly storing your heavy machinery is another necessary, yet more passive method of ensuring optimal and safe performance. All large machinery should be kept in covered, moisture-free storage with environment control if necessary. This will help save your equipment safe from the dangers of water, which can lead to rust and corrosion, as well as from the harshness of direct sunlight.

Source: 5 Maintenance Tips for Heavy Machinery

5. Knowledge is PowerYour machinery is only as useful as the men and women working with it. For upholding the highest standards of operations while minimizing risk, everyone in contact with the equipment should be trained and familiar with the proper use of each piece of machinery on the job. For some machines, simple hands-on instruction is sufficient, while others may require special certifications before operating the machinery. Follow your owner/ operator manual and any other official guidelines pertaining to your specific industry, job type and equipment model before letting just anyone take your backhoe for a spin.

Source: 5 Maintenance Tips for Heavy Machinery

The used earthmoving construction equipment market in Africa has become a multi-million dollar business that has attracted not only many secondhand dealers but also online auction houses eager to tap into this fast growing market. Buyers in Africa are not new to the concept of used goods given their already insatiable appetite for used cars from Japan, Europe and Dubai. In the case of used cars several years ago it resulted in the collapse of several new car franchises in Africa which is a testament to how significant this market force is.Used machinery is here to stay and machinery franchise holders have even caught on the game by introducing what they call factory refurbished equipment in order to remain relevant to market expectations. And what are those expectations? Reasonable prices for reasonably good equipment.When buying used equipment five key pointers emerged when we interviewed various global second hand dealers. We highlight them in this article as well who to go to and have peace of mind.InspectionFirstly, just as with new equipment when buying used, a buyer needs to carefully inspect the equipment and enquire on any warranty availability. Inspection is key so check out for any oil leaks and welds on the structure of the machinery both of which can signal a poorly maintained machine or one which was used very roughly to the point of breaking, hence the welds. Heavy smoke when the engine is turned on is also a bad indication as is any seized parts and don’t be fooled by a smooth talking salesperson either who may tend to downplay these flaws. Dustin Graves of Hoss Machinery International says that you should ask for service history, oil samples and photos of the machine and if you can know who owned the machine originally that would even be better.If you are going to have to buy over the internet Bob Chafla of RLC Equipment based in California, USA advises that you can opt to appoint a local dealer or franchise holder in the region to inspect the machine on your behalf. This is far cheaper than paying for an air ticket and accommodation costs if you were to do the inspection yourself. Lieven Pauwels of Machinery Resale of Belgium adds that you can even ask for a video clip of the machine to see it in action though hidden problems will not be easily noticed.The way of the herdSecondly, going for equipment that is from the more popular brand names will ensure that parts will be available. You don’t want to get stuck with a brand name no one knows and hope to find spares for it round the corner when it breaks down. The scrap yard is filled with such machines that were purchased unwisely because of the unbeatable price offered and got grounded for lack of parts.PriceAnd that brings us to price. This should not be your only guide when buying a piece of equipment. Low price may result in upfront savings but misery later on with escalating costs due to downtime and repairs. Better to pay a little extra for a reasonable machine than rock bottom price for a doubtful machine. German Flores of Worldwide Group who sell and rent machinery puts it well when he says that you only get what you pay for.SimplicitySeveral dealers of second hand equipment tout the advantages of less electronics and this is with good reason because in Africa technical support may not be sophisticated enough to sort out an electrical fault with a computerized system . Your technical team will love you for choosing the old tried and tested models that are simply to operate and maintain not needing high-end computerized diagnosis when it fails to start up.With time however the old will give way to newer machines and as German of Worldwide Group says tier 4 machines will be in the secondhand market soon and with their more sophisticated electronics and special fuels to meet emissions restrictions in Europe and USA the machines will be pricier.Track recordLastly, nothing beats good referrals. A dealer with many satisfied customers is one to look up. Getting your hands on a second hand grader or earth mover is not hard these days. There are many second hand equipment suppliers and many dealers of the popular machinery brands also offer refurbished machinery. In addition to this the internet has introduced online auctions where one can bid for machinery in real time on websites for auctioneers who pride themselves on selling only quality equipment with referrals and testimonials to boot. Look for reputable firms and you’ll be off to a good start. Paul Hindle of Clements Plant warns however that there are many fake companies out there ready to swindle any would be customer with very nice websites but with no equipment at all, so buyer beware!

Source: 5 useful tips when importing used construction equipment | Forestry South Africa