Rental rate framework (cost-based): the 10-minute method

If you can estimate your true cost €/h, you can set a defensible minimum rental rate. This guide explains the logic behind the calculator so you can use it confidently — and explain the number internally.

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Important (so you don’t misuse this)

This is: a cost-based method to set a defensible minimum rate and explain it.
This is not: a market benchmark. Market price varies by demand, availability, delivery, operator, and service level.

On this page

The simple formula Step-by-step inputs 3 assumptions that change everything Worked example (numbers)Day / week / month conversions Common mistakes Next steps

The simple formula

Framework

Depreciation/year = (Machine value − Residual value) ÷ Contract years

True cost €/h = (Depreciation/year + Annual fixed costs) ÷ Hours/year

Recommended rate €/h = True cost €/h × (1 + Target margin)

In Light v1, depreciation is straight-line to an assumed residual value. That keeps assumptions explicit and avoids “depreciate to zero” thinking.

Step-by-step (what to enter)

1) Machine value — purchase price (or replacement value).
2) Contract years — your pricing horizon (often 3–5 years).
3) Hours per year — be conservative. Low utilization inflates true €/h.
4) Residual % — the biggest driver. If unsure, choose conservative and test.
5) Maintenance + insurance — include planned service, wear items, minor repairs.
6) Target margin — profit buffer (risk + overhead + return).

Pro tip

Run two scenarios: realistic and conservative. If the deal only works in the optimistic case, it’s not a rate — it’s a hope.

The 3 assumptions that change everything

1) Hours per year (utilization)

Higher hours/year usually reduce true cost €/h because fixed costs spread out. Low utilization makes even a “cheap” machine expensive.

2) Residual value

Residual drives depreciation. A small change in residual % can move the rate a lot. If you’re unsure, choose conservative and test scenarios.

3) Maintenance reserve realism

Understating maintenance makes rates look great on paper and painful in reality. Include wear items and minor repairs, not just oil changes.

Worked example (numbers)

Example

Machine value: €120,000 • Contract: 4 years • Hours/year: 1,200

Residual: 35% → Residual value €42,000

Depreciation/year = (120,000 − 42,000) ÷ 4 = €19,500

Maintenance/year: €7,200 • Insurance/year: €1,800

Annual fixed costs = 7,200 + 1,800 = €9,000

True cost €/h = (19,500 + 9,000) ÷ 1,200 = €23.75/h

Target margin: 25% → Recommended rate = 23.75 × 1.25 = €29.69/h

Now test sensitivity: if hours/year drops, true cost €/h rises fast. That’s why utilization is such a powerful lever.

How to think about day/week/month pricing

Conversions depend on assumed hours/day. If you price by day but the customer uses fewer hours, your effective €/h rises. If they use more hours, your effective €/h falls. Be explicit and consistent.

A simple rule

If you sell by day/week/month, decide upfront what you mean by a “workday” (e.g., 8h). Then keep it consistent across quotes and contracts.

Common mistakes (and fixes)

Mistake: assuming very high hours/year. Fix: run a conservative scenario too.
Mistake: residual too optimistic. Fix: sanity-check against market reality and condition risk.
Mistake: maintenance too low. Fix: add a reserve for wear items and minor repairs.
Mistake: confusing cost-based rate with market price. Fix: use cost-based as a floor, then adjust for service level and demand.

Next steps

Fast next move: run 2 scenarios in the calculator — a realistic case and a conservative case.

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Next guide to publish

Residual value deep-dive: what moves residual %, common mistakes, and how to sanity-check your assumption.