Wear & Tear Meaning: Quantify Asset Value & Engineer Longevity

Every maintenance professional knows the headache of an unexpected breakdown. The likely culprit? Wear and tear — or the natural, gradual deterioration of equipment and property that comes with time and use. Grasping the definition, legal implications and difference from outright damage is critical. Learn the factors that speed up wear and tear and the proactive maintenance steps to extend asset life and prevent downtime.

Wear & Tear: Definition & Legal Implications

Legally, “natural wear and tear” refers to damage from normal, long-term use. Landlord-tenant law often uses the term to limit tenant liability for damage.

Let’s say you work in property management and need your rental property to be move-in ready after renters move out. During a move-out inspection, you note that the bedroom door handle is shaky as a result of ordinary use — a common example of wear and tear. However, a broken window would be considered property damage, and you would be completely justified to deduct the repair amount from the tenant’s security deposit.

For equipment-reliant industries, wear and tear means gradual equipment deterioration and efficiency loss. Constant stress on parts like gears, joints and bearings eventually reduces overall performance and even leads to system failure over time. In fact, an MIT study reported that 50 percent of lost machine life was due to mechanical wear. 

But techniques like proactive maintenance and recurring inspections can alleviate the effect of wear and tear and extend heavy machinery lifespans.

Wear & Tear vs. Damage: What’s the Difference?

We know that normal wear and tear is the gradual, expected depreciation from continuous equipment use. Examples of wear and tear include the thinning tread of a tire or natural wear of machinery joints. Damage, however, is harm beyond normal use, such as human error or a punctured tire.

Legally, wear and tear commonly falls under routine maintenance and is rarely actionable. But damage can carry liability implications. Distinguishing these two causes of equipment failure helps businesses plan upkeep, manage tasks accordingly and avoid negligence disputes.

How Does Wear & Tear Affect Asset Value?

Ordinary wear and tear has a direct impact on the overall value of your assets, as aging equipment depreciates with continued usage. Accountants calculate and quantify depreciation by estimating an asset’s cost over its estimated lifespan. Organizations track normal use and wear yearly to reflect the asset’s current value in financials.

Two common ways that depreciation is calculated include straight-line and double-declining balance. 

What Is Straight-Line Depreciation? 

With this technique, an asset’s cost is evenly divided throughout its entire lifespan. For example, a $100,000 machine with a 10-year lifespan declines in value by $10,000 every year (assuming standard usage, no damage and negligible salvage value). 

Accountants commonly use this method for its straightforward calculation and to maintain consistent annual expenses.  

What Is Double-Declining Balance?

This approach to depreciation uses an accelerated approach. In the earlier years of the equipment’s lifespan, a higher portion of the asset value is depreciated when signs of wear and tear tend to be more significant. This means write-offs are larger in the earlier years of the equipment’s lifespan and lower towards the end. 

Accountants use this method to give businesses earlier tax advantages while better representing the true value of the equipment based on usage.

What’s the Right Depreciation Method to Use?

Of course, there’s no right or wrong way to account for asset depreciation; it comes down to your business’ approach to finances, the equipment at hand and your tax strategy.

For assets that get used at a consistent rate throughout their useful life, straight line depreciation may make more sense. If you use equipment heavily early on, faster wear suggests the double-declining balance method.

Factors That Affect Wear & Tear

The amount your equipment is used has a direct correlation with the amount of wear and tear you can expect. Common causes of reasonable wear and tear include:

• Frequency of use: The more often you use the equipment, the faster it will become worn down. 
• Material quality: High-grade materials are likely to last longer without getting worn out compared to cheaper, low-grade materials. 
• Operational environment: Exposure to heat, moisture or corrosive substances can make materials deteriorate faster. 
• Staff training: Operators must follow best practices to avoid incessant strain that worsens wear and tear.
• Maintenance practices: Routine maintenance can catch and address minor issues like worn parts and lack of lubrication before they turn into more major problems to mitigate wear and tear and extend equipment lifespans.  

How to Prevent Wear & Tear

Taking the proper steps to care for your machinery can extend its lifespan and prevent costly breakdowns and downtime. Best practices for reducing equipment wear and tear include:

Proper Usage

Following recommended processes and procedures from the manufacturer and training your staff accordingly will prevent undue strain and prevent premature component failure. 

Lubrication

Proper lubrication reduces heat generation and reduces friction by creating a protective film between moving parts, preventing metal-on-metal contact while slowing down surface wear and tear. Schedule lubrication as a key component of your routine maintenance using high-quality lubricants to maintain optimal performance longer. 

Part Replacement

Replacing worn down, aging or defective parts ensures that they don’t jeopardize the performance of the entire system. This technique minimizes component strain, reducing wear and tear and preventing major breakdowns.

Regular Maintenance

Regular maintenance addresses small problems early, preventing excessive stress on vital components. You can incorporate routine tasks such as lubrication, cleaning and part replacements into your maintenance schedule to slow down wear and tear.

How a CMMS Can Help 

A computerized maintenance management system (CMMS) like Coast makes it much easier to prevent excessive wear and tear on your equipment. Here are a few key ways it does this:

• Provides real-time tracking that flags abnormal equipment readings so that technicians can identify potential issues before they worsen
• Schedules routine maintenance, inspections and repairs with simple digital work orders
• Manages parts inventory to ensure you always have spare parts on hand 
• Offers a central location for technicians to record data on equipment wear and tear that is automatically pulled into maintenance reports for better decision-making 

Get started with Coast for free to centralize your maintenance data, automate work orders and better maintain your machinery.