Buying Advice anyone looked at how much per hour it costs to own a cut?

[smstonypoint]

The larger ag tractors don't seem to suffer depreciation with hours as bad as CUT's.

That's an interesting point.

Table 1 in https://www.extension.iastate.edu/agdm/crops/html/a3-29.html gives estimates of depreciation (with age and hours) for 30-79, 60-149, and 150+ HP ag. tractors. There are differences across the sizes, but nothing remarkable. The smallest size category includes utility tractors and I doubt whether many used (any?) CUTs sales were included in the data used to generate the estimates.

Steve

 

[Gittyup]

I've got $22K tied up in my tractor, implements, maintenance, etc. I could easily get about $16K if I sold it all. It has about 600 hours of use. To me this works out to $10/hour without fuel. Add fuel, about $13/hour. How much this changes as the hours pile up depends on repairs, fuel costs, and depreciation. But as of today it's $13/hour. As of today it's also priceless considering the work it has done.

 

[vtsnowedin]

I went to the site Smstonypoint gave us and ran my tractors numbers through it.
roughly it looks like this:
price $28000 minus salvage of $10,080 = $17,920 interest in and out equals zero , taxes and insurance at one percent of initial price equals $280.
Assuming ten years and 2000 hours total use that comes to $9.10 per hour.
Repairs from their table are also just one percent for 2000 hours or $280 or $0.14/hr. Fuel comes to $6.50 hour at $4.00 / gallon ( very close to my actual consumption) and oils and lube another $1.00 per hour .
That all adds up to $16.75 per hour to put into the cost column of the ledger book. It does way more then that in useful work every hour I run it, and I even get paid for some of it. If I was hiring myself and the tractor out I'd be looking at $50 to $75 per hour or I'd stay home.

 

[ovrszd]

I've got $22K tied up in my tractor, implements, maintenance, etc. I could easily get about $16K if I sold it all. It has about 600 hours of use. To me this works out to $10/hour without fuel. Add fuel, about $13/hour. How much this changes as the hours pile up depends on repairs, fuel costs, and depreciation. But as of today it's $13/hour. As of today it's also priceless considering the work it has done.

Playing the Devil's Advocate here Gittyup, no offense meant. You must count the initial cost of your tractor and can only minus that off when you sell the remains. So,,,, $22K for 600 hours of use equates to $36.66 per hr. You must count that expense until such time as you sell the tractor. Then you can minus off whatever the selling price is. Because you see,,, it's cost you more than $13/hour to buy/operate that tractor. No offense meant or intended.

 

[ovrszd]

I went to the site Smstonypoint gave us and ran my tractors numbers through it. roughly it looks like this: price $28000 minus salvage of $10,080 = $17,920 interest in and out equals zero , taxes and insurance at one percent of initial price equals $280. Assuming ten years and 2000 hours total use that comes to $9.10 per hour. Repairs from their table are also just one percent for 2000 hours or $280 or $0.14/hr. Fuel comes to $6.50 hour at $4.00 / gallon ( very close to my actual consumption) and oils and lube another $1.00 per hour . That all adds up to $16.75 per hour to put into the cost column of the ledger book. It does way more then that in useful work every hour I run it, and I even get paid for some of it. If I was hiring myself and the tractor out I'd be looking at $50 to $75 per hour or I'd stay home.

I agree that ten years from now and with 2000 hrs of use you may be at $9.10. But where are you today??? In ten years you can post that your tractor served you at $16.75. But where are you today??

 

[smstonypoint]

Playing the Devil's Advocate here Gittyup, no offense meant. You must count the initial cost of your tractor and can only minus that off when you sell the remains. So,,,, $22K for 600 hours of use equates to $36.66 per hr. You must count that expense until such time as you sell the tractor. Then you can minus off whatever the selling price is. Because you see,,, it's cost you more than $13/hour to buy/operate that tractor. No offense meant or intended.

Richard,

No offense meant or intended, but consult https://www.extension.iastate.edu/agdm/crops/html/a3-29.html to see the way economists compute annual ownership costs.

Steve

Edit: I think part of the confusion arises because depreciation is an expense, but it is not a cash expense.

 

[Gittyup]

Playing the Devil's Advocate here Gittyup, no offense meant. You must count the initial cost of your tractor and can only minus that off when you sell the remains. So,,,, $22K for 600 hours of use equates to $36.66 per hr. You must count that expense until such time as you sell the tractor. Then you can minus off whatever the selling price is. Because you see,,, it's cost you more than $13/hour to buy/operate that tractor. No offense meant or intended.

Well, kind of silly to say the tractor has zero worth and its value does not offset my costs. My point was, if I sold it today for what I listed, it would be ~$13- $14 an hour. You can argue all day not to include the resale, but the residual, depreciated value is real and attainable, if I sold today and got what I asked for. Yeah, ignore that and I can do that math too. But it would be wrong. As I put more and more hours on it the cost per hour will drop and the tractor will continue to have some value, albeit less as the hours accumulate (but often not the case). So, I'm only giving what my cost/hr would be if I sold today. In another 10 years, the numbers might be different, depending on the things I listed. To say the tractor has zero value that should not be included in the cost per hour is just wrong. You have to draw a line in time, be it 5, 10, or 30 years and add up all costs and subtract residual value. I drew a line just for comparisons. This is as close an estimate as I can come up with. After I've had it 40 years and it truly becomes near worthless (maybe), then we can talk about the true cost of ownership/hr. Otherwise, one must consider depreciated value at an instance in time. Using your logic, after 1 hour use, the tractor cost me $22,000 an hour. But that's only true if the tractor is worthless after an hour. Really?

 

[vtsnowedin]

I agree that ten years from now and with 2000 hrs of use you may be at $9.10. But where are you today??? In ten years you can post that your tractor served you at $16.75. But where are you today??

Why would you want to compute it mid stream? If you figure it the day you take delivery and with zero hours on it they are all lemons. It only gets better with time an use. How much better depends on the machines reliability and productivity. Gentlemen farmers with seven year old tractors sporting less then three hunrded hours on the clock have paid a high price for their seat time. I don't have that problem and ten years and 2000 hours is probably a good estimate of where I'll end up.
Where am I today? I owe less then it is worth, I have Zero repairs, 210 hours on the clock, One oil change ,one Hydo filter change, The tanks two thirds full and its plugged in with the plow on. :cool2:

 

[ovrszd]

No offense taken Gentlemen.

I am simply basing my theory on the subject of this thread "anyone looked how much per hour it costs to own a cut". With that question asked, you have no choice but include the initial cost of the machine. then you can deduct whatever the resale value of the tractor is when and if you sell it.

To go the direction you guys are going the question would be "anyone looked at how much per hour it costs to operate a cut?"

Agree or disagree??

 

[Gittyup]

Richard,

I'm sorry but you are splitting hairs. If we really want to talk about the cost to "own", let's talk about the savings incurred by owning:

$5000 fencing
$300 propane burial
$1000 stump removal
$4000 retaining walls
$400 trenching for gutters and septic line
$10,000 for road construction
....

This is savings alone, and not even close to a complete list. One could easily argue that my tractor has earned me money per hour of usage by owning it. But, I'll standby the $14/hour number as a convention way to estimate "cost of ownership".

I bought a tractor not for fun but to save money, and I think I have. From here on out, I'm in 100% in the black