Total Cost of Ownership of Backhoe Loader
Starting any business should include a lot of planning and strategy before. A business started as hunch has a high probability to fail. One need to understand few accountancy terms used in business like investment, resources, cost, value, net profit, break even etc. Any business need a proper planning around all these terms so that all the pitfalls can be checked, and we avoid any setback.
The same is the case with Backhoe loaders. Rental contractors buying Backhoe loaders is a business they are starting. Backhoe loaders comes with a running cost with them. If running cost of any machine is not taken care than the contractor should be ready for surprises. The cost of running a backhoe loader can be termed as total cost of ownership. In broader manner this total cost of ownership can be divided into four major factors which are
EMI & Down payment
Cost of fuel
Cost of maintenance
Other cost as staff, resources etc.
These are well described in below diagram
As the diagram shows these four costs involved in backhoe loader revolves around and forms the total cost of ownership. We will discuss each cost separately in details.
EMI / Down payment:
EMI and down payment both are a part of machine price. For buying backhoe loaders 99% of the contractors take the support of banks or Finance companies to fund the backhoe loader against some rate of interest. The backhoe loader price is directly responsible for this part of cost. Higher the price of backhoe loader higher is the down payment and EMI. This should not mean that expensive machines are not good for your business. What we need to check is whatever backhoe loader we are buying is value for money or not. We should not be paying unnecessary extra for same or similar products.
Cost of Fuel:
Backhoe loaders runs on diesel. In India the cost of diesel is ever increasing. And backhoe loader uses high volume of diesel per hour. Fuel economy plays an important role in the total cost of ownership of backhoe loader. The machine which is saving in fuel economy will reduce the overall cost of ownership and will increase your net profit.
Cost of maintenance:
Along with fuel the backhoe loaders also want lubes and filters periodically. These lubes and filters are called the consumables for the machine. These consumables are to be replaced periodically on machine to let it run smoothly and avoid breakdown. The cost of these consumables adds to the overall cost of ownership of backhoe loader. Higher the cost o consumables higher is the cost of maintenance. This cost of consumables would be calculated on hourly basis. This factor should be kept in mind before purchasing backhoe loader and should be compared with other good brands.
Other expenses: Other expenses in backhoe loader business are related to the salary, breakdown, allowances of the staff and machines. Usually these are like every backhoe loader. Here the difference is only on the quality of aggregates the BHL is having. The low-quality backhoe loader tends to breakdown more and there by increases your other expenses.
Now we will understand how these costs of ownership relates to mahindra EarthMaster backhoe loader.
Total Cost of Ownership of Mahindra EarthMAster
Mahindra EarthMaster backhoe loader is an indigenized machine designed as per the requirement and condition of Indian sites. It is the most Value for money Backhoe loader currently available in India. We will discuss the owing and operating cost of Mahindra EarthMaster in detail.
EMI / Down payment of Mahindra Earth Master: Mahindra Earthmaster is around 1 to 2 lakhs less costly than the market leader. If we calculate the finance equation of Mahindra EarthMaster. If we calculate the EMI savings of Mahindra EarthMaster keeping the ROI as 12 percent reducing and tenure to be of 48 months, we will get the benefit of around 2.5 lakhs at the end of tenure.
Similarly, we will calculate the savings on the fuel on mahindra EarthMaster.
Mahindra EarthMaster saves around .5 liters of fuel per hour minimum. If a typical sit work for backhoe loader is around 200 hrs. and machine saves .5 liters of fuel per hr. Then keeping the current fuel rate as 75 Rs per liter what average monthly savings on fuel cost in mahindra EarthMaster is around Rs 7500/- per month. Summing it up to full loan tenure we get 3.6 lakhs saving from fuel if we use Mahindra EarthMaster Backhoe loaders. In India it is equal to the helper salary.
Coming to the 3rd factor of Owing and operating cost of backhoe loader we have the cost on periodic maintenance of Mahindra EarthMaster backhoe loaders. Mahindra being originated from rural market knows the factor of low maintenance cost from its other division. The same trend is being followed in its backhoe loaders. Mahindra EarthMaster backhoe loaders has the cheapest service cost in Indian Backhoe loader market. The main competitor is around Rs 14 per hour higher than Mahindra EarthMaster backhoe loaders. Calculating for the same machine which runs around 200 hrs. per month this difference will simply save around Rs 3,635/- per hour. This sums up to Rs 1.74 lakhs at the end of loan tenure.
In all if you are buying a backhoe loader then you must consider the overall cost of ownership with above critical factors. In today’s business scenario the backhoe loader which saves the most earns the most.
Mahindra as per its commitment towards nations has given another great product Mahindra EarthMaster for Indian construction industry.