Calculating the True Cost per Hour of Your Forklift
by Halsey Keats, on Nov 21, 2022 6:12:44 PM
There’s a reason you don’t take out a ten-year loan to buy a new car. At first blush, it might look like a good idea. You’d get some of the lowest monthly payments. And spreading out the cost of that shiny new machine makes less of a dent in your budget. But odds are that car is going to need some major repairs over the course of that decade. And you don’t want to be making payments on a vehicle sitting in the shop.
Forklifts follow a similar line of reasoning. Only instead of length loans, it’s the lure of budget pricing that catches many trusting buyers. But like a car, it’s not just the upfront price you pay when investing in a forklift. You’re also investing in its reliability. This is because every repair and service call adds to the total cost of operation.
So how do you know which forklifts are a good investment and which aren’t? That’s where calculating forklift operating cost per hour can help. Read on to learn more about forklift cost per hour and how you can use it to get the most out of your investment.
Why Does Cost per Hour Matter
A forklift’s cost per hour is the total you spend on the forklift divided by the number of hours it’s in operation. It is, in effect, what you pay per hour to keep your forklift running.
Forklift cost per hour is an easy way to distinguish between a good investment and a poor one. First, calculating the cost per hour allows you to make an apples-to-apples comparison between two forklift models. One model might be cheaper to buy than the other, but if the cost per hour is higher, it will be more expensive in the long run.
Second, forklift cost per hour changes as the forklift ages. Keeping an eye on this climb in cost per hour will tell you when it’s time to replace your existing forklift with a newer model. This information keeps you from wasting money on repairs for a forklift that has become too costly to operate.
Forklift Cost per Hour Calculator
Calculating forklift cost per hour isn’t as simple as taking the purchase price and dividing by 24 hours. To calculate the actual cost per hour of your forklift, start by collecting the following information:
- Purchase price of the forklift
- Expected lifespan of the forklift
- Annual operation time of the forklift
- Repair and maintenance costs
- Replacement part costs
- Fuel costs
Let's look at some theoretical examples to show you how these calculations work and how they change yearly. We’ll use round numbers to keep the math simple. And these examples will exclude fuel costs for the sake of brevity. But you should include fuel cost in your forklift cost per hour calculations.
We start with two new forklifts: Forklift A and Forklift B. Forklift A is a high-quality model that costs $25,000. And Forklift B is a budget model that costs $20,000. You expect both forklifts to serve at least 5 years and run about 2,000 hours each year. Dividing the purchase price by the length of service and then dividing that by the annual operation time, we get $2.50/hour for Forklift A and $2.00/hour for Forklift B.
That’s our baseline. Now let’s put them in operation and see how those expenses change by calculating the average forklift cost per hour.
You run a tight ship and ensure that each forklift gets routine maintenance every 200 hours of use. And let’s say the cost of this is $100 each time. That comes to 10 maintenance calls, totaling $1,000. Then every 2,000 hours, you have a complete overhaul performed on each forklift. This runs you $1,500, making the total spent on service $2,500 for the year. That’s an additional $1.25/hour for each forklift. So at the end of year one, Forklift A costs $3.75/hour, and Forklift B costs $3.25/hour to run.
In the second year, you have all the same expected expenses. But Forklift B needs two small service calls. You call a technician and find the issues aren’t covered by warranty. The first call costs you $750, the second $300, and you lose 8 hours of operation time between the two.
That makes the annual service cost of Forklift B $3,550 for the year, and it only ran for 1,992 hours. This increases the additional cost per hour to $1.78/hour. So at the end of the year, Forklift B costs $3.78/hour to run, but Forklift A still costs $3.75/hour.
In the third year, things start to get challenging. Both forklifts need new forks and tires, totaling $1,200 per forklift. But Forklift B goes down again and in a big way. The really expensive parts are covered under warranty. But the service call still costs you $2,000 and puts the forklift out of commission for three 8-hour shifts.
At the end of the year, the maintenance cost for Forklift A is $3,700, and Forklift B is $5,700. Forklift A ran the full 2,000 hours while Forklift B only ran 1,976. This makes the service cost per hour for Forklift A $1.85/hour and Forklift B $2.88/hour. So the total cost per hour is $4.35/hour for Forklift A and $4.88/hour for Forklift B.
What You Learn from Cost per Hour
While Forklift B was the least expensive option in year one, it rapidly became more costly to operate than Forklift A. And that’s without considering downtime losses from truck repairs. These expenses include forklift rental, wasted work hours, and delivery delays, as discussed in the video below. Cost per hour tells you the actual price of ownership for each forklift. With this knowledge, it’s pretty clear that Forklift A will be the better choice in the long run.
The good news is that you can ask for all this information from your dealer while researching your forklift options. Just be sure to ask for the cost per hour and the data the dealer uses to calculate that value. Some unscrupulous dealers will use 8,544 hours (the total hours in a year) rather than the actual forklift operating hours to make the cost per hour appear lower.
Even if you aren’t yet in the market for a new forklift, it’s valuable to calculate the cost per hour for your existing fleet. If a forklift’s cost per hour spikes upward, this tells you it’s reaching the end of its economic life.
Where To Learn More About Forklift Fleet ROI
A forklift is a serious investment for any warehouse. Yet only some forklifts last long enough to show a return on that investment. Calculating your forklift’s cost per hour gives you the necessary information to ensure you get the maximum return out of your fleet.
But, while the cost per hour is an excellent indicator of a forklift’s economic life, there are other tough questions you should ask your dealer before you consider replacing your forklift. Ask about truck population and saturation, inventory size, and supply chain maps. And don’t hesitate to ask the dealer for other customers you can contact for a review of their experience working with that truck and that dealer.
There are a lot of questions to answer when considering the ROI of your forklift fleet. But Southern States Toyotalift can help. To learn more about how to get the best return on your forklift investment, contact our Solutions Team online or visit one of our locations throughout Florida and Georgia.