What is Life Cycle Costing?
Life Cycle Costing (LCC) adds a new dimension to purchasing construction equipment. With LCC, all major costs are established in advance. All of the owning and operating expenses throughout a machine’s working life are considered, not just the initial purchase price. When the true costs are analyzed, the results can be surprising. Apparent purchase price savings can turn out not to be savings at all!
Now more than ever, you need to get the most value for your money with equipment purchases, and that can’t be done without taking into account the total cost of operating the machine. Contractors are being asked to do more with less, and the workload doesn’t stop just because margins are tight. No one wants to have unexpected repairs and maintenance costs, or unforeseen downtime eating away at the operating budget. Used correctly, LCC saves guesswork in budgeting and will save worry about the costs of machine repairs, downtime, and lack of availability. It can also protect you against a dealer who won’t or can’t stand behind the machines they sell.
LCC is not a new concept for purchasing equipment, and has been endorsed by several governmental and professional associations including the National Institute of Governmental Purchasing (NIGP), National Association of State Procurement Officials (NASPO), American Bar Association (ABA), and NAFA Fleet Management Association. More and more businesses are applying LCC in their buying process. Why not try it with your next purchase?
It’s surprisingly simple – talk to your Cashman Equipment Sales Representative about the Equipment Life Cycle Cost Calculation Steps below.
- Begin with the make and model of the equipment and the selling price.
- Subtract the trade-in amount allowed.
- Now you have the initial purchase price.
- Next, include a residual/salvage value for the equipment.
- Add the scheduled maintenance costs over the same period.
- Add the repair costs over the life of the equipment.
- Then add the extended warranty that covers all defective parts and workmanship.
- Next, include a provision for availability that will guarantee the in-service time of the machine.
- Finally, your total life cycle cost for the equipment is established.
You can also get three guarantees: repair costs, maintenance costs, and resale value. Using this process can help you set budgets, predict expenses, establish an equitable process for selecting equipment and, of course, save money. And you have the security of knowing there will be no surprises.
Contact your Cashman Equipment Sales Representative today at (800) 937-2326.