{
  "slug": "equipment-replacement-reserve",
  "title": "Equipment Replacement Reserve Calculator",
  "heading": "Equipment Replacement Reserve Calculator",
  "category": "financial",
  "url": "https://www.revenuelab.fyi/toolbox/equipment-replacement-reserve",
  "summary": "Set aside the right monthly reserve so equipment failure never becomes a cash crisis.",
  "description": "Mowers, trucks, pressure washers, and vacuum trucks all wear out on a schedule, but many small operators only think about replacement cost the day a machine dies. This calculator spreads the expected replacement cost of a piece of equipment across its useful life, factoring in trade-in/salvage value, so you know exactly how much to set aside monthly to fund the next purchase without a loan or a cash crunch.",
  "formula": "Depreciable amount = replacement cost − salvage value. Monthly reserve = depreciable amount ÷ (useful life years × 12).",
  "dateModified": "2026-09-30",
  "run_url": "https://www.revenuelab.fyi/api/public/calc?tool=equipment-replacement-reserve",
  "inputs": [
    {
      "id": "replacementCost",
      "label": "Expected replacement cost",
      "kind": "number",
      "hint": null,
      "default": 12000,
      "unit": "$",
      "min": 200,
      "max": null
    },
    {
      "id": "salvageValue",
      "label": "Expected trade-in/salvage value",
      "kind": "number",
      "hint": null,
      "default": 2000,
      "unit": "$",
      "min": 0,
      "max": null
    },
    {
      "id": "usefulLife",
      "label": "Useful life",
      "kind": "number",
      "hint": null,
      "default": 5,
      "unit": "years",
      "min": 1,
      "max": 20
    },
    {
      "id": "unitsOwned",
      "label": "Units owned (fleet count)",
      "kind": "number",
      "hint": null,
      "default": 3,
      "unit": null,
      "min": 1,
      "max": null
    }
  ],
  "outputs": [
    {
      "id": "monthlyReserve",
      "label": "Monthly reserve per unit",
      "format": "currency",
      "hint": null,
      "primary": true
    },
    {
      "id": "fleetMonthly",
      "label": "Total monthly reserve (fleet)",
      "format": "currency",
      "hint": null,
      "primary": false
    },
    {
      "id": "annualReserve",
      "label": "Annual reserve needed",
      "format": "currency",
      "hint": null,
      "primary": false
    },
    {
      "id": "depreciable",
      "label": "Depreciable amount",
      "format": "currency",
      "hint": null,
      "primary": false
    }
  ],
  "worked_example": {
    "inputs": [
      "Expected replacement cost: 12000 $",
      "Expected trade-in/salvage value: 2000 $",
      "Useful life: 5 years",
      "Units owned (fleet count): 3"
    ],
    "outputs": [
      "Monthly reserve per unit: $167",
      "Total monthly reserve (fleet): $500",
      "Annual reserve needed: $2,000",
      "Depreciable amount: $10,000"
    ]
  },
  "how_to": {
    "title": "How to use this",
    "steps": [
      "Enter expected replacement cost ($).",
      "Enter expected trade-in/salvage value ($).",
      "Enter useful life (years).",
      "Enter units owned (fleet count).",
      "Read your monthly reserve per unit on the right — it updates as you type.",
      "Hit Share to keep the scenario or send it to someone."
    ]
  },
  "scenarios": [
    {
      "name": "Conservative",
      "description": "Lower-end numbers — what if things land soft?",
      "values": {
        "replacementCost": 7000,
        "salvageValue": 1250,
        "usefulLife": 3,
        "unitsOwned": 2
      }
    },
    {
      "name": "Typical",
      "description": "Defaults — the most common real-world setup.",
      "values": {
        "replacementCost": 12000,
        "salvageValue": 2000,
        "usefulLife": 5,
        "unitsOwned": 3
      }
    },
    {
      "name": "Ambitious",
      "description": "Higher-end numbers — what if things really pop?",
      "values": {
        "replacementCost": 19000,
        "salvageValue": 3250,
        "usefulLife": 8,
        "unitsOwned": 5
      }
    }
  ],
  "limitations": [
    "Results are estimates before tax, fees, and inflation unless an input explicitly covers them.",
    "Rates are treated as fixed for the whole period — variable-rate products will drift from this projection.",
    "This is educational maths, not financial advice. Check anything contractual with the lender or your accountant."
  ],
  "faq": [
    {
      "q": "Why not just use accounting depreciation for this?",
      "a": "Tax depreciation schedules (like MACRS) are built to minimize taxable income, not to match actual cash needed for replacement. A truck might be fully depreciated on your tax return in 5 years but still be driven for 8, or it might die at year 6 needing replacement while your books still show book value. This reserve is a cash-planning tool, separate from tax depreciation."
    },
    {
      "q": "Where should the reserve money actually go?",
      "a": "Into a separate business savings account, not the general operating account. Commingling replacement reserves with operating cash is the most common reason equipment failures turn into emergency loans. Even a basic sub-account or bookkeeping category that isn't touched for payroll or rent keeps the reserve real."
    },
    {
      "q": "How does financing change this calculation?",
      "a": "If you finance equipment instead of paying cash, the monthly loan payment partially replaces the reserve, but you should still reserve for the down payment on the next unit and for any gap between loan payoff and actual failure. Many operators run both a loan payment and a smaller reserve fund simultaneously to stay ahead of unexpected early failures."
    }
  ],
  "related": [
    "https://www.revenuelab.fyi/toolbox/crew-loaded-labor-cost",
    "https://www.revenuelab.fyi/toolbox/damage-claim-reserve"
  ],
  "license": "CC-BY-4.0",
  "citation": "RevenueLab — Equipment Replacement Reserve Calculator (https://www.revenuelab.fyi/toolbox/equipment-replacement-reserve)"
}