Machine rate is the input that quietly determines the accuracy of every other price you calculate. Guess it, and every quote you produce inherits the guess. And most makers do guess — usually low, and usually because they are thinking about electricity.
This guide builds the number properly, from six cost components and one multiplier, and works it through for three realistic setups. The figures come from the laser machine cost per hour calculator.
Why the intuitive answer is wrong
Ask a maker what their laser costs to run and you will usually get an electricity calculation: 800 watts, twenty-four cents a kilowatt-hour, call it nineteen cents an hour. That number is correct and almost irrelevant.
Here is the same machine’s full annual cost, from the worked example below:
| Component | Annual cost | Share |
|---|---|---|
| Allocated workspace | $1,800.00 | 54.5% |
| Depreciation | $640.00 | 19.4% |
| Consumables | $300.00 | 9.1% |
| Maintenance | $250.00 | 7.6% |
| Software | $180.00 | 5.4% |
| Electricity | $134.40 | 4.1% |
| Total | $3,304.40 | 100% |
Electricity is the smallest line on the list. Pricing from it understates the real machine cost by a factor of about 25. The two lines that actually matter — workspace and depreciation — are precisely the two that never show up on a bill labelled "laser".
The six components
1. Depreciation
The machine is being consumed as you use it. Spread the loss in value across its working life:
A $3,500 machine with $300 resale value over 5 years: ($3,500 − $300) ÷ 5 = $640/year.
Include what it actually cost to get running — the machine, extraction, chiller, air assist, rotary, jigs, shipping, and any electrical work. A $3,500 laser is rarely a $3,500 installation.
2. Maintenance and repairs
Tubes, lenses, mirrors, belts, bearings, filters, and the annual service you keep postponing. Estimate a yearly figure from your own history, or budget 5–10% of purchase price for a machine in regular use. Laser tubes in particular are a scheduled expense, not an accident.
3. Machine consumables
Items consumed by the machine rather than the product: lens cleaner, wipes, honeycomb, air filters, water treatment, replacement nozzles. Per-product consumables like masking tape belong in the product calculator instead, so you do not count them twice.
4. Software and subscriptions
Design and control software, font and design licences, cloud storage for customer artwork, nesting tools. Perpetual licences should be depreciated across their realistic useful life rather than expensed entirely in the year you bought them.
5. Allocated workspace
Usually the largest line, and the one most often set to zero because the machine lives at home. The space still has value — it could be rented, used for something else, or given back. Charge the business a fair rate for the floor area the machine and its working envelope occupy, including material storage and the room you need to stand.
6. Electricity
0.8 kW at $0.24/kWh over 700 hours = $134.40/year.
Use average draw across a job, not nameplate maximum. Include the extraction fan, chiller, and compressor, which often draw more than the laser itself.
Utilization: the multiplier that changes the answer
Here is the step that separates a real machine rate from a naive one. Your annual costs are fixed, but not every machine hour earns money. Test fires, samples, failed runs, R&D, and the pieces you scrap all consume the year’s cost and bill nobody.
So the annual cost must be recovered across billable hours only:
Machine cost per hour = Total annual cost ÷ Billable hours
700 hours at 70% utilization = 490 billable hours. $3,304.40 ÷ 490 = $6.74/hour.
Utilization has a large, non-obvious effect on the final rate:
| Utilization | Billable hours | Cost per hour | vs. 100% |
|---|---|---|---|
| 100% | 700 | $4.72 | — |
| 85% | 595 | $5.55 | +18% |
| 70% | 490 | $6.74 | +43% |
| 50% | 350 | $9.44 | +100% |
A shop assuming perfect utilization while actually running at 50% is underpricing its machine time by half. If you have never measured this, 65–75% is a reasonable starting estimate for a working shop; new machines and heavily custom work run lower.
Three worked examples
The same method, applied to three realistic setups.
| Hobby desktop | Mid-range shop | Production fiber | |
|---|---|---|---|
| Purchase price | $1,200 | $3,500 | $12,000 |
| Resale value | $150 | $300 | $2,500 |
| Machine hours/year | 300 | 700 | 1,500 |
| Workspace/month | $0 | $150 | $400 |
| Power draw | 0.8 kW | 0.8 kW | 2.2 kW |
| Utilization | 70% | 70% | 70% |
| Annual cost | $817.60 | $3,304.40 | $8,872.00 |
| Billable hours | 210 | 490 | 1,050 |
| Cost per hour | $3.89 | $6.74 | $8.45 |
| Cost per minute | $0.06 | $0.11 | $0.14 |
Two patterns are worth noting. The production machine costs ten times as much to buy as the hobby unit but only a little more than twice as much per hour, because it runs five times the hours. Utilization and volume, not purchase price, drive the hourly figure.
And the hobby machine’s $3.89 is not cheap — it is a real cost that a $1,200 desktop laser imposes on every job, and it is roughly twenty times what its electricity costs.
Cost per minute, and what to do with it
Divide the hourly rate by 60 and you have a number you can apply directly to job estimates. At $6.74/hour, a 36-minute engraving run carries $4.04 of machine cost.
This is a cost, not a price. If you want to bill machine time as a line item with margin on it, solve for it the same way you solve for product price — at a 40% margin, $6.74 becomes $11.24 per hour. Publishing your cost as your rate means running the machine for free.
Four allocation pitfalls
- Double-counting consumables. Masking tape charged both in the machine rate and per item inflates every quote. Machine-level consumables in the machine rate; product-level consumables in the product calculator.
- Confusing finance with depreciation. A loan payment is how you funded the purchase; depreciation is the cost of using it up. Model depreciation, and treat interest as a business overhead.
- Allocating the whole garage. Charge for the space the business actually occupies, not the entire building. Overstating this line inflates every price you quote and can make you uncompetitive for no reason.
- Forgetting to revisit it. Recalculate when you add a machine, move, change your hours materially, or when your electricity rate jumps. An annual review is enough for most shops.
Using the number everywhere else
The point of this calculation is not the number itself — it is that every downstream price becomes defensible. Once you have your machine rate, drop it into the machine cost field of the laser engraving pricing calculator, the handmade product pricing calculator, and any product-specific tool you use.
Calculate it once a year. Use it in every quote. It is the single highest-leverage number in a maker business, and it takes about ten minutes to get right.
Frequently asked questions
How much does it cost to run a laser cutter per hour?
For a small diode or desktop CO2 machine, a fully loaded rate of $3–$7 per hour is typical. Mid-range shop machines commonly land between $6 and $12, and production fiber systems with dedicated space can exceed $15. Electricity is usually the smallest component — depreciation and allocated workspace dominate.
Is machine cost per hour just electricity?
No, and this is the most common error. In our mid-range example, electricity is $134 of a $3,304 annual cost — about 4%. Depreciation contributes $640 and allocated workspace $1,800. Pricing from the electricity meter understates your machine cost by roughly 25 times.
What is utilization and why does it matter so much?
Utilization is the share of your machine hours you can actually bill. Idle time, testing, samples, and failed runs still consume the year’s fixed costs but produce no revenue, so the whole annual cost has to be recovered across billable hours only. Dropping from 100% to 70% utilization raises the hourly rate by about 43%.
Should I include depreciation if the machine is already paid off?
Yes. Depreciation is not a loan payment — it is the cost of consuming the machine. Recovering it is how you fund the replacement rather than being surprised by a $4,000 purchase in year six. If the machine is genuinely at end of life with no replacement planned, you can lower the figure, but zero is rarely the honest answer.
How do I allocate workspace cost fairly?
Take the rent or mortgage-equivalent value of the space the machine and its working area occupy, including extraction and material storage. If your shop is a shared garage, allocate a proportion of the property’s value based on floor area, and only the share actually dedicated to the business.
What if I run more than one machine?
Calculate a separate rate for each, allocating shared costs like workspace and software by usage or floor area. A fiber laser used ten hours a week should not absorb the same workspace charge as a CO2 machine running forty.
Related tools
Machine cost per hour calculator · Laser engraving pricing · The pricing formula