Procurement · Free tool
Total Cost of Ownership Calculator
What will this purchase really cost over the years you keep it? Total cost of ownership adds the running costs to the price tag. This calculator takes the purchase price, the annual operating cost, and the number of years, and gives the total. CFOs, controllers, and operations managers use it to compare equipment, software, and vehicles on a fair footing.
- OutputCost over the term
- No sign-up
- Copy or print the result
- How it works ↓
Your entries stay in this browser. Use Fill example to see a finished page first.
What this procurement tool gives you
The output shows the total cost of ownership, the purchase price, and the operating cost over the term as separate figures. That split is what makes the comparison useful in a meeting: a cheaper machine with higher running costs can end up more expensive than the option that looked pricier on the quote.
What you enter
- Currency: USD by default, or EUR or GBP
- Purchase: the upfront price, in your currency
- Annual operating cost: maintenance, licenses, energy, and other yearly running costs, in your currency
- Years: how long you expect to keep and use it
Worked example
The tool's example uses a $5,000 purchase, $800 a year in operating cost, and a 3-year term. Operating cost over the term is 800 × 3 = $2,400. Total cost of ownership is 5,000 + 2,400 = $7,400. A rival option at $4,200 with $1,200 a year would total $7,800 over the same three years.
How is total cost of ownership calculated?
Operating cost over the term = annual operating cost × years.
Total cost of ownership = purchase + annual operating cost × years.
This is a simple, undiscounted total. Residual or resale value is not deducted, financing costs are not added, and each year's operating cost is assumed to be the same. Years can include a fraction, such as 2.5.
Tips before you use the result
- Use the same number of years for every option you compare; TCO is only meaningful on a like-for-like term.
- Include costs that are easy to forget: training, support contracts, consumables, and installation.
- If you expect to sell the asset at the end, subtract the expected resale value yourself, since the tool does not.
- For long terms or high interest rates, a discounted cash flow gives a more precise comparison than this simple total.
Frequently asked questions
What costs should be included in total cost of ownership?
The upfront price plus everything you pay to keep the asset running: maintenance, repairs, licenses or subscriptions, energy, consumables, insurance, and support. In this tool the upfront items go in the purchase field and the recurring items are added together into one annual operating cost.
Does this TCO calculator account for resale value?
No. The total is purchase plus operating cost over the term, with no deduction for residual or resale value and no financing cost. If an asset will have meaningful resale value, subtract your estimate from the total yourself, and apply the same approach to each option you compare.
Why use TCO instead of purchase price?
Because the cheapest item to buy is not always the cheapest to own. An option with a lower price but higher yearly running costs can overtake a pricier option within a few years. Running each option through the same TCO calculation shows which one costs less over the period you will actually use it.
Do I need an account to compare options?
No account is needed. The tool keeps your last entries in the browser on this device only. To compare several options, copy each output before changing the figures, or print them side by side. Clear resets the three fields for the next option.
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