Equipment Depreciation Calculator

Example data table

Formula used

• Straight-Line: Annual Depreciation = (Cost − Salvage) ÷ Life.
• Declining Balance: Depreciation = Begin Book Value × (Factor ÷ Life), limited so book value never drops below salvage.
• Sum-of-Years' Digits: Depreciation = (Remaining Life ÷ Sum of Years) × (Cost − Salvage).
• Units of Production: Depreciation per Unit = (Cost − Salvage) ÷ Total Units, then Period Depreciation = Units Used × Depreciation per Unit.

Conventions adjust the first-year expense for planning and forecasting.

How to use this calculator

1. Enter the equipment name, purchase cost, salvage value, and useful life.
2. Select a depreciation method that matches your project accounting rules.
3. If using declining balance, choose a factor such as 1.5 or 2.0.
4. If using units of production, set total estimated units and add yearly units.
5. Click “Calculate depreciation” to view results above the form.
6. Download CSV or PDF to attach to budgets, bids, or audits.

Equipment depreciation guide

Why depreciation matters

Construction equipment ties up cash, and depreciation turns that investment into a yearly cost you can allocate to projects. For example, cost 120,000, salvage 20,000, life 7 years produces a 100,000 depreciable base that supports consistent budgeting and bid comparisons. Use the first-year convention when purchases happen midseason and schedules must reflect partial-year ownership.

Capture the right inputs

Accurate schedules start with capitalized purchase cost, realistic salvage, and a life that matches expected rebuild or replacement timing. Use site conditions to guide life: abrasive materials, long hauling, and idle time can change wear rates and resale outcomes. Include delivery, setup, and required initial attachments in the recorded purchase cost.

Straight-line baseline

Straight-line spreads value loss evenly. Annual depreciation equals (Cost − Salvage) ÷ Life, so the example gives 14,285.71 per year. This method is useful when utilization is stable, internal charge rates are fixed, and you want easy forecasting for multi-season programs.

Declining balance option

Declining balance recognizes faster early value loss. Depreciation equals Begin Book Value × (Factor ÷ Life). With factor 2.0 and life 7, the nominal rate is 28.57% before safeguards. The calculator limits depreciation so book value never falls below salvage. This matches early utilization peaks and faster market value drops.

Sum-of-years digits

SYD accelerates depreciation with decreasing weights. The denominator for 7 years is 28, and year one uses 7/28 of the depreciable base. On a 100,000 base, that is 25,000 in year one, then 21,428.57 in year two, and so on.

Units of production

When operating hours swing, units of production tracks activity. Depreciation per unit equals (Cost − Salvage) ÷ Total Units. If total hours are 14,000 and the base is 100,000, the rate is 7.142857 per hour; 2,200 hours yields 15,714.29.

Use results in job costing

Convert annual depreciation into an ownership rate by dividing by planned hours or days, then add fuel, operators, insurance, repairs, and mobilization. This improves equipment charge-out rates, highlights underutilized assets, and supports rent-versus-own decisions for specific project durations.

Document and review

Export the schedule to CSV or PDF for bid files, asset registers, and stakeholder reviews. Re-check assumptions each year: salvage can move with market demand, and life can change after rebuilds. If repairs exceed annual depreciation, a replacement plan may be justified. Keep the focus year aligned with the contract timeline so stakeholders see the most relevant expense window.

FAQs

1) Which method is best for construction projects?

Straight-line fits steady utilization and simple planning. Declining or SYD suits faster early value loss. Units of production is strongest when hours or output vary widely across seasons and crews.

2) What should be included in purchase cost?

Use the capitalized cost: invoice price, delivery, taxes, setup, commissioning, and required initial attachments. Do not include fuel, operator wages, or routine maintenance because those are operating costs.

3) How do I set salvage value?

Estimate resale or scrap using recent auctions, dealer quotes, and comparable hour ranges. Adjust for condition, rebuild history, transport constraints, and attachments. Update salvage yearly as markets change.

4) Why won’t the schedule go below salvage?

The calculator caps depreciation so ending book value stays at or above salvage. This prevents overstating expense and keeps the schedule consistent with the residual value you expect at disposal.

5) What does the half-year option mean?

It applies an approximate partial first-year charge for budgeting when equipment is acquired midyear. Policies vary by organization and jurisdiction, so treat it as a planning convention, not official tax advice.

6) What units work for units of production?

Use measurable wear-related units like engine hours, miles, cycles, cubic meters moved, or tons processed. Enter total expected units and yearly units to align depreciation with real utilization.

7) How should I use the exported files?

Attach CSV to estimating templates and asset registers, and use the PDF for bid packages, lenders, or audits. Keep exports with supporting assumptions so reviewers can trace inputs and updates.