Calculate annual depreciation, current value and cost per hour for your farm machinery. Understand true ownership costs for tractors, harvesters, seeders and sprayers.
A new tractor costs $300,000, useful life 12 years, used 600 hours/year, salvage value 20% ($60,000).
This tractor costs $33/hour in depreciation alone. Add interest, insurance, repairs ($50-80/hour) for true operating cost.
Straight-line: (Purchase Price − Salvage Value) ÷ Useful Life. Most farm machinery has a 10-15 year useful life and 20-30% salvage value.
Tractors: 10-15% per year, harvesters: 12-18% per year. Most value is lost in first 3-5 years. After 10 years, machinery typically retains 20-30% of new price.
Depreciation is a tax-deductible expense. Australian farmers can use instant asset write-off for assets under $20,000 or depreciate larger assets over effective life.
Used (3-5 years old) has much lower depreciation rate — often best value. Compare total cost of ownership including depreciation, repairs, interest and insurance.