The cost of air from a diesel machine, in order of size
| Cost element | What drives it | Typical share of lifecycle cost at high utilisation |
|---|---|---|
| Diesel | Hours run × litres per hour × price per litre; the machine’s size, its load and its condition | The largest item by far on a machine that works full days |
| Capital, net of residual value | Purchase price less what the machine sells for at the end, spread over the years | Second at low hours, third or lower at high hours |
| Scheduled service | Every 300 running hours on diesel units: engine and compressor oil, filters, separator, belts; parts plus the technician’s time | Grows directly with hours |
| Repairs and major work | Injectors, turbo, cooling, unloader and regulator, airend at the end of its bearing life, canopy and chassis | Rises steeply after the first few thousand hours and with poor servicing |
| Finance | Interest on borrowed capital, or the return the money would have earned elsewhere | Depends on the rate and the term |
| Transport and mobilisation | Moving the machine between sites, loading, permits | Depends on how often it moves |
| Insurance, registration and storage | Annual, regardless of hours | Small but fixed |
| Operator | Where the duty needs one | Separate from the machine, but real |
| Downtime | The crew and rig standing while the machine is repaired | Invisible in the ledger, large in practice |
Two things stand out. Diesel dominates, so a machine that burns 10% more fuel for the same air costs far more than the price difference between two makes. And several items are fixed per year: insurance, finance and the capital’s own decline in value carry on whether the machine runs 400 hours or 2,500. That is why utilisation decides the own-or-hire question.
What hire costs, and what it includes
A hire rate is normally quoted per month (or per week for short jobs) for a machine class: 185 cfm, 450 cfm, 900 cfm at 7 bar, high-pressure units for drilling. From our own fleet the rate includes delivery and commissioning, hoses and manifolds, servicing every 300 running hours with parts, breakdown support and a replacement if the machine cannot be repaired on site; fuel, site security and a standing area are the hirer’s, and an operator is extra where asked for. The compressor rental page sets out the inclusions in full. In economic terms, hire converts most of the fixed and uncertain costs of ownership, capital, residual value, finance, servicing and repair risk, into one known monthly figure, and leaves fuel as the variable cost in both cases.
The arithmetic, step by step
Annual cost of ownership = (purchase price − residual value) ÷ years of ownership + finance cost on the capital employed + (hours per year ÷ 300) × cost of a 300-hour service + repair allowance per year + insurance, registration and storage + transport per year + hours per year × litres per hour × diesel price.
Annual cost of hire for the same work = months of hire per year × monthly rate + mobilisation per hire + the same hours × litres per hour × diesel price.
Cost per running hour for each = annual cost ÷ hours per year. Break-even utilisation is the number of hours per year at which the two annual costs are equal; above it, ownership is cheaper per hour; below it, hire is. Fuel appears on both sides and cancels in the comparison, which is why the decision turns on the fixed costs against the hire rate rather than on diesel.
Worked example 1: A civil contractor, 600 hours a year
A contractor needs a 450 cfm, 7 bar diesel machine for breakers and the occasional blasting job, perhaps 600 running hours spread over four months of the year. Illustrative figures, not quotations: purchase price ₹18 lakh; residual after 5 years ₹7 lakh; finance at 11%; a 300-hour service at ₹18,000; repair allowance ₹60,000 a year; insurance and storage ₹40,000; transport ₹30,000; diesel 22 L/h at ₹92.
Ownership: capital decline (18 − 7) ÷ 5 = ₹2.2 lakh; finance on an average ₹12.5 lakh employed ≈ ₹1.4 lakh; two 300-hour services ₹36,000; repairs ₹60,000; insurance ₹40,000; transport ₹30,000; diesel 600 × 22 × 92 = ₹12.1 lakh. Total ≈ ₹17.4 lakh a year, of which about ₹5.2 lakh is the cost of having the machine and ₹12.1 lakh is diesel.
Hire: four months at an illustrative ₹1.2 lakh a month = ₹4.8 lakh, plus ₹20,000 mobilisation, plus the same ₹12.1 lakh of diesel = ₹17.1 lakh. On these figures the two are within ₹0.3 lakh of each other, and that is the point: at 600 hours the contractor is paying almost the same either way, but with hire he carries no repair risk, no idle capital and no machine to sell in five years. Break-even on these figures is about 600 hours a year; below it hire is clearly cheaper, above it ownership starts to pull ahead.
Worked example 2: A borewell rig owner, 2,400 hours a year
A rig owner runs a 1,100 cfm, 25 bar high-pressure machine with the rig 200 days a year, 12 hours a day. Illustrative figures: purchase ₹48 lakh; residual after 6 years ₹15 lakh; finance 11%; a 300-hour service ₹32,000; repair allowance ₹2.5 lakh a year (engine and airend attention is certain at these hours); insurance ₹60,000; transport is with the rig; diesel 48 L/h at ₹92.
Ownership: capital decline (48 − 15) ÷ 6 = ₹5.5 lakh; finance on ₹31.5 lakh average ≈ ₹3.5 lakh; eight services ₹2.56 lakh; repairs ₹2.5 lakh; insurance ₹0.6 lakh; diesel 2,400 × 48 × 92 = ₹106 lakh. Total ≈ ₹120.6 lakh, of which ₹14.6 lakh is the machine and ₹106 lakh is diesel.
Hire: ten months at an illustrative ₹3.6 lakh a month = ₹36 lakh plus the same diesel = ₹142 lakh. Ownership wins by more than ₹20 lakh a year; at 2,400 hours the fixed costs of ownership are spread thin and the hire rate, which must cover the fleet owner’s own capital and risk, cannot compete. Break-even is around 700–750 hours a year. The number that matters most to this owner is not own-or-hire at all: it is the 48 L/h. A machine that is 8% more fuel-efficient at the same air saves roughly ₹8.5 lakh a year, which dwarfs any difference in purchase price.
What the two examples teach
- Below roughly 600–800 hours a year, hire is usually cheaper and always lower-risk; above it, ownership usually wins, and the margin grows with hours.
- Fuel is the cost to optimise on a high-hours machine: specific fuel consumption, correct sizing (a 1,100 cfm machine running a 700 cfm hammer burns diesel for nothing), and condition (a blocked filter or a worn airend raises litres per cfm).
- Residual value is real money: a machine with its service records, a known airend history and a clean canopy sells for far more than the same machine without them. The used compressors page shows what buyers look for.
- The repair allowance is not pessimism. Injectors, turbos, cooling systems and airends have lives measured in hours; a budget that assumes none of them will be touched is a budget that will be wrong.
- Downtime belongs in the calculation even though it is hard to price: a rig crew standing for two days while a privately owned machine waits for parts costs more than a month of hire.
The hybrid answer most fleets end up with
Own the machine that runs every day; hire the one that runs some weeks of the year. A contractor with one steady site and occasional second jobs owns one 450 cfm unit and hires the second when two sites overlap. A rig owner owns the high-pressure machine and hires a 7 bar unit for the odd blasting contract rather than mis-using the drilling machine. A plant with a seasonal peak owns its base and hires the peak. The own the base, rent the peak and hire or buy guides work through the arrangements; the rental versus ownership calculator covers the same decision for electric plant machines.
New, used or refurbished: Changing the capital line
The arithmetic above assumes a new machine. A refurbished unit at perhaps 55–65% of the new price, with a documented airend and engine history and a six-month warranty, lowers the capital decline line and often the finance line, at the cost of a somewhat higher repair allowance and a shorter remaining life. For a contractor near the break-even point, a refurbished machine can tip the answer toward ownership; for a rig owner at 2,400 hours a year, the fuel line still dominates and a new, efficient machine usually pays. Run the calculator with both purchase prices and see where the break-even moves.
Indian site conditions and the numbers
Heat and dust shorten service lives: on open sites in Telangana and Andhra Pradesh the air filter and the cooler need attention between the 300-hour services, and a machine that is not cleaned trips on temperature in April and May, which is downtime. Fuel quality on remote sites damages injectors, so the repair allowance for a machine that fuels from drums is higher than for one fuelled from a depot. Transport between sites on district roads costs tyres, lights and towing gear. These are not reasons to hire rather than own; they are reasons to put honest numbers in the service and repair lines, and to insist on the 300-hour servicing whether the machine is yours or hired.
The interactive calculator needs JavaScript. The worked example below shows the method with fixed numbers.
How Reddy Compressors helps
We sell new, used and refurbished portable diesel compressors, hire them from our own fleet with 300-hour servicing included, and service and repair them whoever owns them, so we can show the own-or-hire comparison with real service and repair figures from our own fleet rather than guesses. Independent multi-brand specialist since 2002; more than 20 service engineers and technicians across Telangana and Andhra Pradesh.
What to send us
- The machine class you need (cfm and pressure) or the tools and hammer it will run
- Hours per day and days per year, as honestly as you can estimate them
- Whether the machine moves between sites, and how often
- Your current fuel consumption and service costs if you already own one; WhatsApp 99590 60718
Frequently asked questions
How many hours a year make buying worthwhile?
On typical figures, somewhere between 600 and 800 running hours a year; above that ownership usually costs less per hour, below it hire does. The calculator gives the break-even for your own numbers.
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Short explainers on this topic
Slide-by-slide engineering explainers from Reddy Compressors. More in the video library.
Does fuel change the own-or-hire decision?
No, because you pay for the diesel either way; it cancels in the comparison. It does decide which machine to own: fuel is the largest cost on any machine that works full days.
What residual value should I assume?
Depends on make, hours and records. A well-documented machine at moderate hours retains a good share of its price after five years; one with unknown history retains much less. Use a conservative figure and keep the records.
Can the hire include fuel?
Normally the hirer buys fuel; fuel-inclusive terms can be agreed for some long-term hires. The calculator keeps fuel separate so the comparison is clean.
What about GST, depreciation and tax?
They change the cash flows and depend on your business; the calculator works in pre-tax operating terms. Your accountant can add the tax treatment to the result.
Is a refurbished machine a false economy?
Not if it comes with records, a tested airend and engine, and a warranty; it moves the break-even down. It is a false economy when bought on a photograph.
Related pages
Technical content reviewed by D. Srinivas Reddy, Managing Partner and service engineer, Reddy Compressors. Last updated 4 November 2026. How our engineering content is reviewed.