Total cost of ownership / TCO

Total costs of ownership shows how much an asset will cost the business over its lifetime. The amount of TCO results from the acquisition cost and the sum of all cost incurred during operation. Calculating TCO makes it easier to choose between similar assets.

The total cost of ownership (TCO) is the sum of the purchase price and the cost of operating the asset over its entire life cycle. By determining the total cost of ownership, we can get a better idea of how much the given asset will cost the business in the long run.

The total cost of ownership is mostly used when deciding on a large-value investment or asset purchase. In such cases, it is not only worth considering how much the asset costs at the given moment and whether it is cheaper or more expensive than devices with similar capabilities. We also need to know the costs of its operation and maintenance during the time that the asset is in our service.  

The costs incurred during operation are not completely self-explanatory. Maintenance and repair costs can still be estimated relatively well (or even insured), but estimating damage from downtime is a more complex task.   

The total cost of ownership can be compared with the total cost of ownership of competitive products and the expected value of the products produced by the asset. With the former, we base the decision on the purchase, with the latter we can get an answer on the return on the asset.