Machinery Rent vs Buy Calculator
Compare the yearly cost of owning a machine (depreciation, interest, insurance, running) with custom hire rates, and find your break-even hours.
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Please note: These figures are estimates for planning only. Interest rates, scale of finance, insurance premium rates, subsidies and market charges are set by banks, government notifications and mandi committees and change from season to season. Confirm the current figures with your bank, insurance company, CSC or mandi office before making a decision.
Should you buy that tractor or harvester, or keep hiring? Enter the price, life and interest rate, your running cost and the custom hire rate. The calculator shows the yearly cost each way and the number of hours a year above which owning becomes cheaper.
About the Machinery Rent vs Buy Calculator
A machine standing in the shed still costs money. Every year it loses value (depreciation), ties up money that could earn interest, and needs insurance and a shelter. These fixed costs are the same whether you use the machine for 50 hours or 500. On top of that come running costs – diesel, driver and repairs – for every hour of work.
Hiring has no fixed cost, but you pay the full hire rate every hour. So the question is simply: how many hours a year will you use it?
- Below the break-even hours, hiring is cheaper.
- Above it, owning is cheaper – and you also get the machine when you need it, not when the hirer is free.
Many farmers use a machine less than they expect. If your own use is low, owning can still pay if you also hire it out to neighbours – add those hours to your yearly use, and count the income as a lower running cost.
How to use the Machinery Rent vs Buy Calculator
- 1 Enter the purchase price after subsidy, how many years you will keep it and its resale value at the end.
- 2 Enter the interest rate on your loan and the yearly insurance and shed cost.
- 3 Enter your own running cost per hour and the custom hire rate per hour.
- 4 Enter the hours you expect to use it each year and press Compare.
The formula we use
Depreciation = (Price − Resale value) ÷ Years
Interest = (Price + Resale value) ÷ 2 × Interest rate
Fixed cost = Depreciation + Interest + Insurance and shed
Break-even hours = Fixed cost ÷ (Hire rate − Running cost per hour)
Cost of owning = Fixed cost + Running cost × HoursThis is the standard straight-line method used in farm management to compare machinery options.
Worked example
A tractor costs ₹7,00,000, will be kept 10 years and sold for 20%. Interest is 9%, insurance and shed 2%. Running cost is ₹700/hour and hiring costs ₹1,200/hour. You need it for 300 hours a year.
- Depreciation = (7,00,000 − 1,40,000) ÷ 10 = ₹56,000.
- Interest = (7,00,000 + 1,40,000) ÷ 2 × 9% = ₹37,800.
- Insurance and shed = ₹14,000. Fixed cost = ₹1,07,800 a year.
- Break-even = 1,07,800 ÷ (1,200 − 700) = 216 hours a year.
- At 300 hours: owning ₹3,17,800, hiring ₹3,60,000 – owning saves ₹42,200 a year.
Things to keep in mind
- Timeliness has value. Sowing or harvesting on time can be worth more than the cost difference – especially for wheat sowing and paddy harvesting.
- Custom Hiring Centres and farmer groups can offer lower hire rates; subsidies on machinery also change the numbers.
- Be realistic about hours. A tractor on a small farm is often used only 300–500 hours a year.
Frequently asked questions
When is it better to buy a tractor than hire one?
When you would use it for more hours each year than the break-even point, which depends on the price, your running cost and local hire rates.
What is depreciation?
The value a machine loses each year through age and wear. Spread over its life, it is usually the largest ownership cost.
Why include interest if I pay cash?
Because the money could have earned interest in a bank or paid off another loan. Farm economists always count this "opportunity cost".
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