← Business Metric: Financial (all topics)
Total cost of ownership (TCO)
What it is
The full lifetime cost of an asset - purchase price plus energy, consumables, maintenance, downtime, financing and disposal, less residual value. For many industrial and consumer assets the purchase price is a small fraction of the total
It shifts the buying decision from what something costs to what it costs to use
Impact on industries
- Shifts competition from purchase price to lifetime economics, which favours technically superior manufacturers over low-cost importers
- Lets a supplier justify a price premium with an auditable saving - energy, uptime, consumable life - rather than with claims
- Requires the buyer to think in lifetime terms, and price-sensitive or capital-constrained buyers frequently cannot
- It underpins outcome-based and equipment-as-a-service pricing, where the supplier absorbs the lifetime cost and bills for the result