Professional services
Medical Practice Equipment Cost Calculator
Works the cost of owning clinical equipment, where the purchase price is the smaller half.
Result
Buying is charged as depreciation plus a finance cost on the money tied up, rather than as the purchase price in year one, because that is what the asset actually costs you per year of use. Ignoring the cost of capital makes buying look better than it is, particularly for a practice that could deploy the same money elsewhere. The break even volume is the figure that decides this, and it is why the answer is about your throughput rather than about the equipment: the same machine is an obvious purchase at high volume and an obvious outsource at low volume. Note that a service contract is often the largest recurring line after the asset itself, and that clinical equipment may carry regulatory, calibration and accreditation obligations that cost money and are not in this arithmetic.
Get a Free Business AuditHow the calculation works
Purchase or lease cost spread over useful life, plus service contracts, calibration, consumables, and the cost of the space it occupies, giving an annual cost and a cost per use at the expected volume. Cost per use is what determines whether equipment pays, and it is dominated by volume rather than by the purchase price.
What moves the number
- Expected volume of use, which drives cost per use entirely.
- Service contracts and calibration requirements.
- Consumables per use.
- Useful life, including when software support ends.
Where this one goes wrong
Equipment justified on an optimistic volume forecast is the classic practice purchase that never pays, because cost per use is inversely proportional to volume and a machine used half as often as projected costs twice as much per use. Build the case on volume you can demonstrate from existing referrals or visits. Service contracts and the end of software support are the other underestimated items, and for some equipment the second arrives before the hardware wears out, which shortens useful life regardless of condition.
Before you quote
- Base the case on demonstrable volume, not projected.
- Include service contracts and consumables in the total.
- Check how long software support will be available.
Questions
About this calculator
Why does practice equipment fail to pay for itself?
Volume. Cost per use is inversely proportional to how often it runs, so a machine used half as often as projected costs twice as much per use. Building the case on demonstrable rather than hoped-for volume is what separates the purchases that work.
What gets left out of equipment cost?
Service contracts, calibration, consumables per use, and the cost of the space it occupies. Together they frequently exceed the purchase price over the life of the equipment, which is why cost per use rather than price is the number to decide on.
How long is useful life?
Often until software support ends rather than until the hardware fails, and for connected equipment that can arrive well before physical wear. Asking about the support horizon before purchase is worth doing, because it sets the real depreciation period.
The formula
buying = (price - salvage) / life + finance on the average balance + service + consumables + install / life; break-even uses = fixed ownership cost / (per use fee - consumables)
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How to use this calculator
- Purchase price ($). Enter your own figure; the page starts at $78,000.
- Useful life (years). Enter your own figure; the page starts at 7.
- Resale value at the end (%). Enter your own figure; the page starts at 10%.
- Finance or cost of capital rate (%). Enter your own figure; the page starts at 8%.
- Lease payment per month ($). Enter your own figure; the page starts at $1,450.
- Lease term (months). Enter your own figure; the page starts at 60.
The result updates as you type, so you can try a figure, see what it does to cheapest route, and change it back. Nothing you enter is sent anywhere or saved.
A worked example
These are the figures the calculator opens with. Every number in the results column below is produced by the same calculation the page runs, so you can follow it through before putting your own figures in.
What goes in
| Input | Value |
|---|---|
| Purchase price | $78,000 |
| Useful life (years) | 7 |
| Resale value at the end | 10% |
| Finance or cost of capital rate | 8% |
| Lease payment per month | $1,450 |
| Lease term (months) | 60 |
| Buyout at the end of the lease | $7,800 |
| Fee per use if outsourced or rented | $65 |
| Uses per month | 90 |
| Service contract per year | $5,600 |
| Consumables per use | $8 |
| Installation and training | $4,500 |
| Revenue collected per use | $185 |
What comes out
| Result | Value |
|---|---|
| Cheapest route main result | Buying |
| Buying, per year | $28,343 |
| Leasing, per year | $33,200 |
| Paying per use, per year | $70,200 |
| Revenue per year | $199,800 |
| Annual contribution if bought | $171,457 |
| Cost per use if bought | $26.24 |
| Uses per month where buying beats paying per use | 29 |
At 90 uses a month, Buying is cheapest: buying costs $28,343 a year, leasing $33,200 and paying per use $70,200. Bought, each use costs $26.24 against 185 of revenue. Buying beats paying per use above 29 uses a month.
How sensitive the answer is
Holding everything else steady and changing only purchase price, this is what happens to cheapest route. It is worth knowing which of your inputs the answer actually hinges on, and which barely move it.
| Purchase price ($) | Cheapest route |
|---|---|
| $39,000 | Buying |
| $58,500 | Buying |
| $78,000 example above | Buying |
| $117,000 | Leasing |
| $156,000 | Leasing |
Every other input is held at the example value while this one changes, which is not how a real job behaves. Treat it as a guide to which number matters most, not as five separate quotes.
What each figure means
- Purchase price ($)
- A money amount, between 0 and 10000000, starting at $78,000.
- Useful life (years)
- A number, between 1 and 30, starting at 7.
- Resale value at the end (%)
- A percentage, between 0 and 90, starting at 10%.
- Finance or cost of capital rate (%)
- A percentage, between 0 and 40, starting at 8%.
- Lease payment per month ($)
- A money amount, between 0 and 200000, starting at $1,450.
- Lease term (months)
- A number, between 1 and 360, starting at 60.
- Buyout at the end of the lease ($)
- A money amount, between 0 and 2000000, starting at $7,800.
- Fee per use if outsourced or rented ($)
- A money amount, between 0 and 20000, starting at $65.
- Uses per month
- A number, between 0 and 100000, starting at 90.
- Service contract per year ($)
- A money amount, between 0 and 500000, starting at $5,600.
- Consumables per use ($)
- A money amount, between 0 and 5000, starting at $8.
- Installation and training ($)
- A money amount, between 0 and 500000, starting at $4,500.
- Revenue collected per use ($)
- A money amount, between 0 and 50000, starting at $185.
What the results tell you
| Result | What it is |
|---|---|
| Cheapest route | The headline result. A category or planning selection, rather than a measured quantity. |
| Buying, per year | A money figure. |
| Leasing, per year | A money figure. |
| Paying per use, per year | A money figure. |
| Revenue per year | A money figure. |
| Annual contribution if bought | A money figure. |
| Cost per use if bought | A money figure. |
| Uses per month where buying beats paying per use | A number. |
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