Farm Machinery Cost Calculations
Farm equipment is typically the secondlargest investment for a crop farm after land, and it is usually the most complex when determining annual costs. By developing annual costs for equipment, producers have an estimate of farm machinery costs that can be used in enterprise budgeting and wholefarm planning, as well as decisions such as asset replacement. Farm machinery costs are separated into two categories:
 ownership costs, which include depreciation, interest, taxes, insurance, and housing
 operating costs, which include repairs, fuel, lubrication, and labor
Annual ownership costs are calculated from financial information, and annual operating costs are calculated using data from detailed equipment records or from engineering factors (if detailed records are not available). This publication demonstrates the process of calculating farm machinery costs using engineering factors when detailed records are not available or when projecting costs for new equipment.
The engineering factors used in the following analysis are from the American Society of Agricultural and Biological Engineers (ASABE) Standards 2011. These factors include salvage value estimates and machine performance rates of field efficiency, field speed, fuel consumption rates, and repair factors. Some wellaccepted estimates will also be used from Farm Management (Kay, Edwards, & Duffy, 2020) which include taxes, interest, and housing (TIH) costs as a function of average equipment value, lubrication and filter costs as a function of fuel costs, and labor hours as a function of machine hours.
Ownership Costs
Depreciation is an expense that represents the loss in value of equipment due to age, wear, and obsolescence. The annual cost spreads the initial purchase cost across the useful life of the equipment. There are several techniques for calculating depreciation including methods used for income tax preparation. The technique used for this analysis and typically used for budget projections is straightline depreciation. It is calculated as (initial purchase cost – salvage value) / useful life = annual depreciation expense.
Salvage value is the market value of an asset at the time that it is sold or removed from service. Salvage value can be estimated by various methods; in this publication, we will use factors available in Kay, Edwards, and Duffy (2020), which are based on ASABE Standards. Table 1 lists the salvage value factors. The salvage value is calculated as the salvage value factor / 100 × the new list price of the equipment.
As an example of depreciation calculations, consider a 130 horsepower (hp) twowheeldrive tractor with a list price of $120,000; with dealer discounts, the purchase cost was $115,000. If the expected useful life is 10 years, the salvage value factor is 37 as shown in Table 1. Salvage value is estimated to be ($120,000 × 37 / 100) = $44,400. The annual depreciation is then calculated as [($115,000 – $44,400) / 10] = $7,060.
Interest is the cost of using capital invested in farm equipment. With borrowed capital, interest cost is based on the loan interest rate. With owner equity capital, interest cost is based on the interest rate or rate of return on the next best alternative use of the capital. There are several methods to calculate loan payments depending on conditions of the loan, but interest cost for this analysis will be calculated as the interest cost on the average value of the equipment by multiplying the average value times the interest rate: (initial purchase cost + salvage value) / 2] × interest rate = annual interest expense. This calculation will provide the average annual interest cost over the life of the asset. Using the example above with an interest rate of 5 percent, the annual interest expense is calculated as [($115,000 + $44,400) / 2] × 0.05 = $3,985.
Taxes in Mississippi for farm equipment are sales taxes levied on the purchase of the equipment at the time of sale. As such, these are a onetime cost and should be added to the initial purchase cost. Insurance costs are estimated at 0.5 percent of the average cost, and housing is estimated at 1.0 percent of average cost. Taxes, insurance, and housing (TIH) factors are often combined into one factor of 1.5 percent of average value. Continuing with the example above, the annual expense for TIH is calculated as [($115,000 + $44,400) / 2] × 0.015 = $1,195.50 (round to $1,196).
Total annual ownership cost is the sum of depreciation, interest, and TIH. In this example, total annual ownership cost is $7,060 (sum of depreciation) + $3,985 (interest) + $1,196 (TIH) = $12,241.
Age of machine in years 
Harvesting, crop 
Harvesting, forage 
Miscellaneous 
Planters 
Tillage 
Tractors 150+ hp 
Tractors 80–149 hp 

1 
69 
56 
61 
65 
61 
67 
68 
2 
58 
50 
54 
60 
54 
59 
62 
3 
50 
46 
49 
56 
49 
54 
57 
4 
44 
42 
45 
53 
45 
49 
53 
5 
39 
39 
42 
50 
42 
45 
49 
6 
35 
37 
39 
48 
39 
42 
46 
7 
31 
34 
36 
46 
36 
39 
44 
8 
28 
32 
34 
44 
34 
36 
41 
9 
25 
30 
31 
42 
31 
34 
39 
10 
22 
28 
30 
40 
30 
32 
37 
11 
20 
27 
28 
39 
28 
30 
35 
12 
18 
25 
26 
38 
26 
28 
34 
Note: If age of machine exceeds 12 years, the salvage value is assumed to remain constant at the 12year level.
Source: Kay, Edwards, and Duffy (2020), based on ASABE Standards.
Operating Costs
Table 2 shows the engineering factors used in the following analysis.
Repair costs are best estimated using detailed history for the individual piece of equipment because of differences in manufacturers, management factors, and working conditions. However, if detailed records are not available, factors have been established by the ASABE that are proportional to the original list price for a type of equipment. For example, a twowheeldrive tractor up to 150 hp has an average repair cost per 100 hours of use of 0.84 percent of new list price (as shown in Table 2). The average repair cost, then, for a 130 hp twowheeldrive tractor with a list price of $120,000 and annual use of 400 hours is estimated to be ($120,000 × 0.0084 / 100 hours × 400 hours) = $4,032 per year.
Fuel costs can be estimated using a fuel consumption factor multiplied by the PTO horsepower of the equipment multiplied by the price of fuel. The fuel consumption factors found in ASABE Standards 2013 are 0.060 gallons/horsepowerhour for gasoline, 0.044 gallons/horsepowerhour for diesel, and 0.08 gallons/horsepowerhour for LP gas. For example, the 130 hp diesel tractor from above would have an estimated fuel consumption of (130 hp × 0.044 gallons/hphour) = 5.72 gallons per hour. For 400 hours of annual use and diesel price of $1.50 per gallon, the estimated annual fuel cost for the tractor would be (5.72 gallons / hour × 400 hours × $1.50/gallon) = $3,432.
Equipment category 
Equipment type 
Field efficiency – range^{1} 
Field efficiency – typical^{1} 
Field speed – range^{1} 
Field speed – typical^{1} 
Estimated life (hours)^{1} 
Average repair factor^{2} 

Harvesting, crop 
Corn picker sheller 
60–75 
65 
2.0–4.0 
2.5 
2000 
1.33 
Harvesting, crop 
Potato harvester 
55–70 
60 
1.5–4.0 
2.5 
2500 
2.74 
Harvesting, crop 
PT combine 
60–75 
65 
2.0–5.0 
3.0 
2000 
1.33 
Harvesting, crop 
Sugar beet harvester 
50–70 
60 
4.0–6.0 
5.0 
1500 
7.77 
Harvesting, crop sp 
SP combine 
65–80 
70 
2.0–5.0 
3.0 
3000 
1.33 
Harvesting, crop sp 
SP cotton picker 
60–75 
70 
2.0–4.0 
3.0 
3000 
2.65 
Harvesting, forage 
Forage harvester 
60–85 
70 
1.5–5.0 
3.0 
2500 
2.60 
Harvesting, forage 
Large rectangular baler 
70–90 
80 
4.0–8.0 
5.0 
3000 
1.74 
Harvesting, forage 
Large round baler 
55–75 
65 
3.0–8.0 
5.0 
1500 
5.95 
Harvesting, forage 
Mower 
75–85 
80 
3.0–6.0 
5.0 
2000 
7.47 
Harvesting, forage 
Mower (rotary) 
75–90 
80 
5.0–12.0 
7.0 
2000 
8.80 
Harvesting, forage 
Mowerconditioner 
75–85 
80 
3.0–6.0 
5.0 
2500 
3.12 
Harvesting, forage 
Mowerconditioner (rotary) 
75–90 
80 
5.012.0 
7.0 
2500 
8.80 
Harvesting, forage 
Rectangular baler 
60–85 
75 
2.5–6.0 
4.0 
2000 
4.00 
Harvesting, forage 
Side delivery rake 
70–90 
80 
4.0–8.0 
6.0 
2500 
2.45 
Harvesting, forage sp 
SP forage harvester 
60–85 
70 
1.5–6.0 
3.5 
4000 
1.20 
Harvesting, forage sp 
SP windrower 
70–85 
80 
3.0–8.0 
5.0 
3000 
1.80 
Miscellaneous 
Bean puller/windrower 
70–90 
80 
4.0–7.0 
5..0 
2000 
3.12 
Miscellaneous 
Beet topper/chopper 
70–90 
80 
4.0–7.0 
5.0 
1200 
1.33 
Miscellaneous 
Boomtype sprayer 
50–80 
65 
3.0–7.0 
6.5 
1500 
4.63 
Miscellaneous 
Fertilizer spreader 
60–80 
70 
5.0–10.0 
7.0 
1200 
3.09 
Planters 
Grain drill 
55–80 
70 
4.0–7.0 
5.0 
1500 
5.00 
Planters 
Rollerpacker 
70–90 
85 
4.5–7.5 
6.0 
2000 
2.45 
Planters 
Row crop planter 
50–75 
65 
4.0–7.0 
5.5 
1500 
5.00 
Tillage 
(Coulter) chisel plow 
70–90 
85 
4.0–6.5 
5.0 
2000 
3.70 
Tillage 
Field cultivator 
70–90 
85 
5.0–8.0 
7.0 
2000 
3.56 
Tillage 
Heavyduty disk 
70–90 
85 
3.0–6.0 
4.5 
2000 
2.92 
Tillage 
Moldboard plow 
70–90 
85 
3.0–6.0 
4.5 
2000 
5.05 
Tillage 
Mulcherpacker 
70–90 
80 
4.0–7.0 
5.0 
2000 
3.12 
Tillage 
Rotary hoe 
70–85 
80 
8.0–14.0 
12.0 
2000 
3.03 
Tillage 
Rotary tiller 
70–90 
85 
1.0–4.5 
3.0 
1500 
5.40 
Tillage 
Row crop cultivator 
70–90 
80 
3.0–7.0 
5.0 
2000 
3.91 
Tillage 
Spring tooth harrow 
70–90 
85 
5.0–8.0 
7.0 
2000 
3.91 
Tillage 
Tandem disk harrow 
70–90 
80 
4.0–7.0 
6.0 
2000 
3.91 
Tractors 150+ hp 
2WD 150+ hp 
12000 
1.12 

Tractors 150+ hp 
4WD & crawler 150+ hp 
16000 
0.48 

Tractors 80–149 hp 
2WD <150hp 
12000 
0.84 

Tractors 80–149 hp 
4WD & crawler <150 hp 
16000 
0.48 
^{1}Source: ASABE Standards (2011).
Lubrication and filter costs can be estimated as 15 percent of fuel costs. Using the example above, annual costs for lubrication and filters will be ($3,432 × .015) = $515.
Labor cost for machinery use is estimated by multiplying the annual machinery hours by a factor of 1.2 to estimate labor hours, then multiplying labor hours by the wage rate in dollars per hour. The factor of 1.2 is a ruleofthumb factor to be used as an estimate of the time spent by workers in pre and post operations such as fueling, conducting preventive maintenance, and cleaning. Continuing with the example above with 400 hours of annual use and a wage rate of $15 per hour, the estimated cost of labor is (400 hours × 1.2 × $15/hour) = $7,200.
Total annual operating cost is the sum of repair costs, fuel costs, lubrication and filter costs, and labor costs. In the example above, total annual operating cost is $4,032 (repairs) + $3,432 (fuel) + $515 (lubrication and filters) + $7,200 (labor) = $15,179.
Total annual cost is the sum of total annual ownership costs and total annual operating costs. Total annual cost for the example above is calculated as $12,241 (total annual ownership costs) + $15,179 (total annual operating costs) = $27,420.
This value may be useful for some decisions, such as wholefarm planning, but, more often, calculations are made to determine costs per hour and costs per acre, which are used to compare equipment costs, develop costs of operations, and develop enterprise budgets. Total cost per hour is calculated by dividing total annual cost by the estimated annual use in hours. In this case, total cost per hour for the 130 hp tractor is calculated as ($27,420 / 400 hours) = $68.55 per hour.
Combined cost per hour is calculated by adding the cost per hour for the tractor and the cost per hour for an implement. Fuel and lubrication costs are calculated for the tractor and not for the implement. Labor costs are calculated for the tractor and not for the implement in order not to doublecount labor costs.
Combined cost per acre is useful when determining the cost of an operation such as the cost of planting or the cost of a tillage operation. The combined cost per acre is calculated by dividing total cost per hour by the field capacity in acres per hour. Field capacity is measured in acres per hour and is calculated as [speed (mph) × width (feet) × field efficiency (%) × 5,280 feet/mile] / (43,560 square feet/acre). You can develop speed and field efficiency numbers through farm records or use the ASABE Standards as shown in Table 2, which we will use here. The following example demonstrates the calculations for tractor plus implement, including combined cost per hour and combined cost per acre.
Example Calculation
To illustrate the machinery cost calculations for a tractor plus implement, this example uses a 190 hp fourwheeldrive tractor with a 32foot field cultivator. Table 3 shows the initial information. The tractor has a list price of $200,000, purchase cost of $189,000, expected useful life of 20 years, and estimated annual use of 400 hours. The field cultivator has a list price of $45,000, purchase cost of $42,900, expected useful life of 10 years, and estimated annual use of 100 hours. Diesel price is $1.50 per gallon, wage rate is $15 per hour, and interest rate is 5 percent.
Tractor, 190 hp, 4wheel drive 
Field cultivator 


Equipment category 
Tractors 150+ hp 
Tillage 
Equipment type 
4WD & crawler 150+ hp 
Field cultivator 
List price 
$200,000 
$45,000 
Purchase cost 
$189,000 
$42,900 
Expected useful life (years) 
20 
10 
Horsepower rating (tractor only) 
190 

Width (feet) (implement only) 
32 

Annual use (hours) 
400 
100 
Interest rate (%) 
5.00 
5.00 
Fuel price 
$1.50 per gallon 

Labor wage rate 
$15.00 per hour 
Table 4 shows the ASABE factors for the tractor and field cultivator. Factors for the tractor are salvage value factor of 28 and repair factor of 0.48. Factors for the field cultivator are field efficiency of 85 percent, field speed of 7 miles per hour, salvage value factor of 30, repair factor of 3.56, and field capacity of 23.1 acres/hour.
Tractor, 190 hp, 4wheel drive 
Field cultivator 
Sources of factors 


Field efficiency (typical) (%) 
85 
ASABE (2011) 

Field speed (typical) (mph) 
7 
ASABE (2011) 

Salvage value factor 
28 
30 
ASABE (2011) 
Repair average factor 
0.48 
3.56 
ASABE (2011) 
Field capacity (acres per hour) 
23.1 
Calculation 

Fuel use (diesel) 
0.044 gallons/hphour 
ASABE (2011) 

Lubrication and filters 
15% of fuel cost 
Kay, Edwards, & Duffy (2020) 

Labor hours 
1.2 times machinery hours 
Kay, Edwards, & Duffy (2020) 

Taxes, insurance, and housing 
1.5% of average value 
1.5% of average value 
Kay, Edwards, & Duffy (2020) 
Table 5 shows machinery cost calculation results. Total annual cost for the tractor is $31,421 (total annual ownership cost of $14,613 + total annual operating cost of $16,808). Total annual cost for the field cultivator is $6,375 (total annual ownership cost of $4,773 + total annual operating cost of $1,602). Total combined cost per hour is $142.30 ($78.55/hour for the tractor and $63.75/hour for the field cultivator). The combined cost per acre is $6.17.
Tractor, 190 hp, 4wheel drive 
Field cultivator 


Basic data 

List price 
200,000 
45,000 
Purchase cost 
189,000 
42,900 
Salvage value 
56,000 
13,500 
Ownership life in years 
20 
10 
Estimated annual use in hours 
400 
100 
Ownership costs 

Depreciation 
6,650 
2,940 
Interest 
6,125 
1,410 
Taxes, insurance, and housing 
1,838 
423 
Total annual ownership costs 
14,613 
4,773 
Operating costs 

Repairs 
3,840 
1,602 
Fuel 
5,016 

Lubrication and filters 
752 

Labor 
7,200 

Total annual operating costs 
16,808 
1,602 
Total annual costs 
31,421 
6,375 
Costs per hour and per acre 

Ownership costs per hour 
36.53 
47.73 
Operating cost per hour 
42.02 
16.02 
Total cost per hour 
78.55 
63.75 
COMBINED COST PER HOUR 
$142.30 

COMBINED COST PER ACRE 
$6.17 
Summary
Because farm equipment is such a large capital investment for a farm business, managers should carefully analyze the costs per hour and costs per acre for equipment and for field operations. Actual farm records are the preferred source of data for calculations, but, if records are not available, the ASABE’s factors can be used to estimate key items necessary to calculate machinery costs. An accompanying spreadsheet using this method is available at https://www.agecon.msstate.edu/whatwedo/budgets.php.
References
ASABE Standards. 2011. Agricultural Machinery Management Data, ASAE D497.7. American Society of Agricultural and Biological Engineers. St. Joseph, Michigan (Reaffirmed 2015).
Kastens, T. 1997. Farm Machinery Operation Cost Calculations. Kansas State University Experiment Station and Cooperative Extension Service. MF2244.
Kay, R. D., W. M. Edwards, and P. A. Duffy. 2020. Farm Management. McGraw Hill. New York, NY.
This material is based upon work supported by USDA/NIFA under Award Number 20187002728585.
Publication 3543 (POD1020)
By Jeff Johnson, PhD, Extension/Research Professor, Agricultural Economics.
The Mississippi State University Extension Service is working to ensure all web content is accessible to all users. If you need assistance accessing any of our content, please email the webteam or call 6623252262.