Original Equipment Cost (OEC)

Original Equipment Cost (OEC)

What is the Original Equipment Cost?

The Original Equipment Cost, or “OEC”, is a measure of the cost to replace an asset in an equipment fleet with a like asset of new condition.

What else should I know?

OEC is a critical metric, as it is a leading indicator of fleet size and performance. When used in conversation, OEC is used as a primary indicator of business size and potential. For example, one may say “My OEC is $50 million”, which refers to the cost to replace their entire fleet with new assets.

Often, a professional equipment manager will also speak to the number of assets in their fleet, although that becomes less clear of a metric due to small assets that are less trackable and may have very low OEC, comparatively.

 

How is OEC used in the equipment rental industry?

It is a critical way to measure the relative size and value of equipment-centric businesses, especially the larger rental suppliers, like United Rentals, Sunbelt Rentals and HERC Rentals.

Often, in their public financial statements, the leading indicator of enterprise value is the Original Equipment Cost. Below, through the 2019 Annual Report from United Rentals, you can see how OEC is communicated as a critical financial performance KPI (just after revenue, actually).

Original Equipment Cost United Rentals

 

How do contractors use Original Equipment Cost?

Contractors, and more specifically their equipment managers, use OEC less publicly than rental suppliers. It is a key indicator on their balance sheets, but often that information is private. Regardless, it is an indicator of the relative strategy of a contractor and how they resource their equipment utilization need.

 

You’re clearly looking to optimize your equipment costs…

Have you checked out IronUp? Our platform helps you begin to manage your equipment rental activity in one place, for all suppliers, for the first time. In short, manage your rented equipment just as professionally as your owned equipment.

 

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