Total Cost of Ownership
Total Cost of Ownership is the complete direct and indirect cost associated with owning and using an asset, system, product, or service.
What this term means in maintenance
Total Cost of Ownership is the complete direct and indirect cost associated with owning and using an asset, system, product, or service.
What TCO may include
Total Cost of Ownership can include:
- Acquisition
- Installation
- Integration
- Training
- Operation
- Energy
- Maintenance
- Support
- Downtime
- Upgrade
- Compliance
- Disposal
Practical example
A low-cost compressor has high energy use, expensive parts, and poor service support. Its TCO exceeds that of a more efficient and maintainable alternative.
TCO versus purchase price
Purchase price is only the initial cost. TCO evaluates the broader financial effect over the ownership period.
Use in maintenance
TCO supports equipment selection, service-contract review, repair-versus-replace decisions, and software evaluation.
Common mistake
Including every theoretical indirect cost without a clear calculation can make the result difficult to defend.
Related concepts
Related maintenance terms
Keep exploring connected CMMS, reliability, and maintenance planning terms.
Life Cycle Cost
Life Cycle Cost is the total cost of acquiring, operating, maintaining, improving, and disposing of an asset over its useful life.
Maintenance Cost
Maintenance cost is the total financial value of labor, parts, contractors, services, consumables, and other resources used to maintain assets.
Asset Lifecycle Management
Asset lifecycle management is the coordinated management of an asset from need and acquisition through operation, maintenance, improvement, renewal, and disposal.
Total Cost of Ownership FAQs
- What does TCO mean?
TCO means Total Cost of Ownership.
- How is TCO different from purchase price?
It includes operating, maintenance, support, downtime, upgrade, and disposal costs.
- What decisions use TCO?
Equipment selection, repair or replace, contract review, and system investment.