Total cost of ownership (TCO) is an analysis that takes a comprehensive look at the overall cost of something over its useful life, from purchase to disposal. It is an effective tool for organizations, corporations, and even individuals to help determine the impact of a purchase decision and to compare each option’s costs and benefits.

When corporations or organizations are considering significant capital expenditure decisions in areas such as Information Technology (IT) systems, office furniture, utility systems, and other business resources, they invariably turn to TCO analysis to help make the most cost-effective and profitable decision. TCO analysis looks at all of the costs associated with a purchase, such as installation and setup, regular maintenance and repairs, training, upgrades, and disposal. This type of in-depth analysis helps organizations understand the true short- and long-term costs of the purchase and ultimately make better decisions.

Individuals may use TCO when considering the purchase of a vehicle or other large, costly item with similar ongoing costs. In addition to the initial purchase price, individuals may look at the cost of insurance, fuel, and regular maintenance over an extended period, in addition to the resale value of the item when making a TCO analysis. By doing this, buyers have a better understanding of the true cost of the item over the years, enabling them to make more informed decisions.

In the end, TCO analysis is the process of look at the overall cost of a purchase before, during and after ownership. TCO takes into account not just the initial cost of purchase, but also the costs associated with setup, maintenance, repairs, and even disposal when considering the purchase of a large asset. This type of analysis is used by corporations and individuals alike to ensure they are making the most cost-effective decisions in the short- and now long-term.