Beyond the sticker – Calculating total cost of ownership in compact track loaders

Compact track loaders are an increasingly vital part of contractors’ businesses and therefore your rental fleet. The sheer versatility of these machines allows them to thrive in a variety of working conditions, and, thanks in part to growing attachment diversity, CTLs can be used for more applications than ever.

A strategic rental of a compact track loader can transform a contractor’s productivity, providing the opportunity to take on more jobs, often in new applications.

The profitability of a compact track loader for your business, however, can vary greatly from machine to machine. Not all CTLs are created equal when it comes to total cost of ownership. Factors like repair costs, maintenance intervals, fuel efficiency and resale value affect what the loader will cost its owner in its lifetime. Rental stores that want to maximize profitability must take care to invest in equipment that is not (necessarily) inexpensive to buy, but is inexpensive to own.

Thankfully, there are indicators store managers can look for to help determine which will be the most profitable machine and will ultimately offer the lowest total cost of ownership for their business.

Purchase price
The most obvious and easily factored-in component of total cost of ownership is purchase price. While it can be tempting to favor the cheapest possible option, fleet managers should consider a few things to ensure that minimizing their initial investment doesn’t end up costing them more in the long run.

First, be sure to invest in a CTL that will handle the jobs your customers are doing. This means considering things like horsepower, lift capacity, ground speed and attachment capabilities. A contractor that hopes to take on forestry jobs that require demanding mulching attachments will regret purchasing a low-horsepower unit that struggles to handle these types of tasks. In addition, consider the seasonal weather conditions – snow, rain, heat, cold – in your area that could challenge the CTL beyond its capabilities. Putting stress on a compact track loader that it was not designed to manage will inevitably increase maintenance and repair costs over time, as well as reduce efficiency due to more frequent breakdowns.

Second, account for the other factors that play into total cost of ownership to ensure the CTL will be cost-efficient to own, such as anticipated maintenance expenses and other operating costs. Often, investing in a higher-quality machine up front will save the store money over time. Consider that the difference in price between a high-quality loader and a cheaply manufactured machine is only a fraction of the total cost of ownership over the machine’s lifetime.

Maintenance costs
Careful study of wear items and service intervals will show that a high-quality, low-maintenance machine can save its owner in excess of $10,000 in service costs in the first two years alone. Your mechanic can look at the designs of major CTL components to help anticipate regular maintenance costs.

Saving just a few minutes on each regular maintenance activity, such as oil changes, daily and weekly greasing and changing fuel and hydraulic filters, can add up to thousands of dollars over the course of a year.

Ease and cost of regular maintenance
Regular maintenance activities, such as oil changes, daily and weekly greasing and changing fuel and hydraulic filters, are an often-underestimated factor in total cost of ownership. Even planned maintenance takes time, and, in the rental world, time is money, especially during busy season.

Designs incorporating easy access to drain and fill plugs provide a key difference in reducing maintenance time. Some designs require track removal for motor oil changes – an inconvenience that can cost your back shop hundreds of hours per year in work time.

Fuel and hydraulic filter mounting and access can also make a huge difference in the amount of time a compact track loader is down for regular maintenance. Machines designed for simple maintenance will have rigid-mounted, spin-on fuel filters for easy access and faster changes. Some manufacturers use insert filters that are often hidden deep in the engine bay. While this can save them headaches on the engineering side, it costs the end user time and money. A compact track loader that features hydraulic filters in easy-to-access places can save your staff precious minutes on every filter change and allow them to get the machine back on rent faster.

A well-designed machine will also feature vertically mounted filters. Some manufacturers include horizontally mounted filters that create an inevitable mess of spilled oil when they are removed, causing even more wasted time and dragging out the process.

Finally, a well-designed CTL will have easily accessible grease points. Some CTLs feature Zerk fittings on the end of pins rather than the side: a simple change that ensures quick and easy greasing. If your mechanic can save 10 minutes per day with more efficient greasing and works 200 days a year, he could save around 66 hours in just two years. That’s around $2,000 in labour, not to mention the billable hours the machine was not rented.

Less unplanned maintenance
Beyond regular maintenance and wear parts, periodic track derailment is an expensive and all-too-common issue for compact track loader operators. The main culprit is tracks that are rigid and derail relatively easily in rough terrain or side slopes.

All-rubber tracks reinforced with flexible, high-strength, internal polycord allow the tracks to maximize ground contact by flexing around objects that find their way into the undercarriage. These machines also feature extra track guiding, virtually eliminating track derailment, as well as reducing the number of tension adjustments required as hours are put on the tracks.

Track derailment can waste the better part of an entire workday. Your customer can expect four to five hours of downtime every time a track derails and you can expect a service call. Factor in some labour and travel, and derailment can cost around $600 per event, plus a lost day of work for your client.

Utilization and doing what others can’t
An often-overlooked element of total cost of ownership is equipment utilization and performance. A compact track loader that can function in a variety of conditions and multiple seasons, for example, increases its value as part of your fleet. You should consider a track loader’s capabilities in muddy and wet conditions, as well as snow and ice in colder months.

Year-round utilization has huge implications for the profitability of the machine. Staying busy in winter months with snow removal services can help rental stores get more value out of their equipment. Compact track loaders tend to have a reputation for lackluster performance on snow and ice. Some manufacturers, however, make CTLs that perform as well or better than their wheeled counterparts in snow. A high number of ground contact points is key for winter work because it increases traction, allowing the machine to push and turn well on snow and ice. It also reduces ground pressure, which increases flotation and decreases the risk of the track loader getting stuck in tricky areas.

Compact track loaders are sometimes overlooked because wheeled machines historically have had faster ground speeds. Today, however, some manufacturers are making compact track loaders with ground speeds comparable to wheeled machines. This is good news for the contractor who can save money by using their CTL year round, capitalizing on the advantages of a tracked machine while avoiding the challenges commonly associated with a skid steer.

A compact track loader increases its value and versatility when it can work safely on sensitive turf, especially in landscaping applications that require being conscious of damage to sensitive lawns. A high number of ground contact points reduces overall ground pressure and prevents turf damage. A higher number of bogie wheels spreads the unit’s weight more evenly, granting more flotation in snowy or muddy conditions and causing less damage to turf. Minimal turf damage means less time spent repairing ground after a project and therefore happier customers. A turf-conscious CTL can open doors to new business and new applications from landscaping and lawncare customers.

Track derailment is a major cause of downtime in CTLs. Choose designs with flexible yet robust tracks to reduce this cost of ownership.

Resale value
The final piece to a comprehensive total cost of ownership calculation is expected resale value. A good place to start is researching equipment trading websites or other used equipment listings online to estimate what different machines tend to sell for used.

Assuming the average CTL trade-in happens at the three- to four-year mark and track loaders are rented on average 750 hours per year, the average machine will be at somewhere between 2,250 and 3,000 hours at trade-in. With these conditions in mind, it will help fleet managers to know that the average midsize compact track loader will sell for 50 to 60 percent of its retail price at three years old, and between 40 and 50 percent at four years old. This figure is certainly not going to hold true in every situation, but it can be a good starting point for the store manager searching for a CTL investment that will hold its value.

Bringing it all together
Calculating total cost of ownership up front can help you anticipate expenses over the life of a machine. Taking the time to consider every facet of total cost of ownership – purchase price, maintenance costs, utilization and resale value – will help minimize any unwelcome financial surprises in the life of the machine, and help set up a rental business for long-term success. With as much as $10,000 in service cost savings in the first two years of ownership alone, it is certainly worth your time to consider total cost of ownership before purchase. 

Buck Storlie is a product manager for Yanmar Compact Equipment North America.