How to Calculate an Excavator Hourly Rate
Quick answer
An excavator charge-out rate is built from four blocks per hour: ownership (depreciation + finance + insurance ÷ annual hours), running costs (fuel + servicing + repairs), operator, and overhead — then divided by (1 − margin %) to get the sell rate. The most common mistake is dividing by hoped-for hours instead of realistic billable hours.
The four cost blocks
- —Ownership — depreciation (price − residual, spread over life), finance on the capital, insurance and compliance
- —Running — fuel (L/hr × price), servicing, repairs and wear items (tracks, pins, buckets, teeth)
- —Operator — fully-costed wage with on-costs, if quoting a wet rate
- —Overhead — the machine's share of yard, admin, transporter, vehicles and management
The formulas
Formulas
Depreciation/yr = (purchase price − residual) ÷ ownership life
Finance/yr = average capital × interest % (average capital ≈ (price + residual) ÷ 2)
Ownership/hr = (depreciation + finance + insurance) ÷ annual hours
Running/hr = fuel L/hr × fuel price + servicing + repairs
Break-even/hr = (ownership + running + operator) × (1 + overhead %)
Charge-out = break-even ÷ (1 − margin %)
Worked example — 14 t excavator
Worked example
Purchase $180,000, residual $60,000 after 8 years, 1,400 hrs/yr
Depreciation $15,000/yr + finance $8,400/yr + insurance $4,500/yr = $27,900 ÷ 1,400 = $19.93/hr ownership
Fuel 14 L/hr × $1.55 + $8 servicing + $6 repairs = $35.70/hr running
$55.63 subtotal × 1.10 overhead = $61.19/hr break-even
÷ (1 − 15 % margin) = $71.99/hr dry charge-out
Where rates go wrong
The number that sinks most rates is annual hours. A machine that could do 2,000 hours but actually bills 1,100 costs nearly double per hour what the optimistic rate assumed. Use last year's actual hours, not the brochure. And revisit the rate when fuel moves — at 14 L/hr, a 30-cent fuel change is over $4/hr straight off your margin.
This is an indicative business calculation, not an NZ market rate — every machine, finance deal and region differs.
Save the rate you build into Fieldlink's Rate Library and every estimate prices your plant the same way.
See the Rate Library