Length of Operational Life and Its Impact on Life-Cycle Costs of a Tractor in Switzerland

• Published in: Agriculture (Basel) Vol. 7; no. 8; p. 68
• Main Author: Lips, Markus
• Format: Journal Article
• Language: English
• Published: Basel MDPI AG 08.08.2017
• Subjects: Agricultural equipment; Agricultural management; agriculture; Costs; Defense spending; Discount rates; Exhaustion; Life cycle costs; life-cycle costing; machine; Machine tools; Machinery and equipment; operational lifespan; Satellites; Sensitivity analysis; Service life; total cost of ownership
• ISSN: 2077-0472; 2077-0472
• DOI: 10.3390/agriculture7080068

Assuming full exhaustion of their estimated service life-also referred to as estimated technical working life-the low annual utilisation of agricultural machines in Switzerland leads to a long operational life. To determine the costs of an additional year’s service, we calculate the life-cycle costs (LCCs), which encompass all costs for an 82 kW four-wheel-drive tractor over its entire operational life. Assuming full utilisation of the estimated service life of 10,000 h, five operating versions are compared, each with an operational life of between 10 and 30 years and matched annual utilisations between 1000 h and 333 h. A key finding is that an additional year in service increases LCCs by 4.5% of the tractor’s purchase price. In addition, we carry out a sensitivity analysis by applying discount rates of between 0% and 4%, finding that a comparatively high discount rate of 3% leads to almost identical LCCs for all operating versions. We conclude that the annual utilisation and the resulting duration of operational life have a strong impact on LCCs. A short operational life associated with high annual utilisation is a promising strategy for substantially cutting machinery costs.