Lifetime Cost

AAA

DEFINITION of 'Lifetime Cost'

A total of all other costs relating to a good over its expected lifetime in addition to the amount paid to acquire it. These extra expenses, which usually cover costs involved with maintaining the good, often when added together over time, can be greater than the original purchase price of the underlying good.

BREAKING DOWN 'Lifetime Cost'

For example, outgoing cash flows do not stop once you buy a car. Consider the costs involved with weekly gas fill ups, periodic oil changes and other types of maintenance, such as roadside assistance, car washes and insurance payments. One can easily spend considerably more than the car's purchase value.

Consumers should be wise to examine the impact of incurring the annual portion of a good's lifetime cost on their budget before committing to a purchase.

RELATED TERMS
  1. Implicit Cost

    A cost that is represented by lost opportunity in the use of ...
  2. Expense

    1. The economic costs that a business incurs through its operations ...
  3. Household Expenses

    A per person breakdown of general living expenses. It includes ...
  4. Budget

    An estimation of the revenue and expenses over a specified future ...
  5. Original Cost

    The total costs associated with the purchase of an asset. The ...
  6. Duty Free

    Goods that international travelers can purchase without paying ...
Related Articles
  1. Budgeting

    Are You Living Too Close To The Edge?

    If a missed paycheck will make your finances cave in, you must learn how to make proper supports.
  2. Retirement

    Keep Working Or Stay At Home With The Kids?

    Choosing to stay at home with the kids is a choice that has both positive and negative financial consequences.
  3. Budgeting

    The Economics Of Pet Ownership

    Before you bring a furry friend into your household, make sure you can handle the hefty financial commitment.
  4. Economics

    Understanding Switching Costs

    Consumers incur switching costs when they receive a monetary or other type of penalty for changing a supplier, brand or product.
  5. Investing

    What’s Holding Back the U.S. Consumer

    Even as job growth has surged and gasoline prices have plunged, U.S. consumers are proving slow to respond and repair their overextended balance sheets.
  6. Economics

    Explaining Market Penetration

    Market penetration is the measure of how much a good or service is being used within a total potential market.
  7. Economics

    Calculating the Marginal Rate of Substitution

    The marginal rate of substitution determines how much of one good a consumer will give up to obtain extra units of another good.
  8. Home & Auto

    5 Cars That Will Save You Money in 2015

    Learn which cars will save you money in 2015, whether you are looking for a compact, mid-size or full-size car, or even a pickup truck.
  9. Stock Analysis

    Is the Apple Watch a Real Threat to Fitbit?

    Examine the potential for marketplace competition between Fitbit and the Apple Watch in the rapidly growing consumer wearables industry.
  10. Investing News

    How 'Honesty' Could Pay off for Jessica Alba

    Is it possible that Jessica Alba is one of the savviest businesswomen on the planet?
RELATED FAQS
  1. What does marginal utility tell us about consumer choice?

    In microeconomics, utility represents a way to relate the amount of goods consumed to the amount of happiness or satisfaction ... Read Full Answer >>
  2. What are some common ways product differentiation is achieved?

    There are many ways to achieve product differentiation, some more common than others. Horizontal Differentiation Horizontal ... Read Full Answer >>
  3. What is the difference between an OEM (original equipment manufacturer) and a VAR ...

    An original equipment manufacturer (OEM) is a company that manufactures a basic product or a component product, such as a ... Read Full Answer >>
  4. Is the retail sector also affected by seasonal factors?

    Generally speaking, the retail sector is highly seasonal. Almost invariably, sales in the retail sector are highest in the ... Read Full Answer >>
  5. What has the retail sector evolved to its current structure?

    Retail is the catch-all phrase for the sale of final goods to consumers; a retail transaction is considered an "end" and ... Read Full Answer >>
  6. How does an investor compute a Seasonally Adjusted Annual Rate of Sales for an automotive ...

    The seasonally adjusted annual rate of sales (SAAR) for an automotive company can be calculated by taking the unadjusted ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Stock Market Crash

    A rapid and often unanticipated drop in stock prices. A stock market crash can be the result of major catastrophic events, ...
  2. Financial Crisis

    A situation in which the value of financial institutions or assets drops rapidly. A financial crisis is often associated ...
  3. Election Period

    The period of time during which an investor who owns an extendable or retractable bond must indicate to the issuer whether ...
  4. Shanghai Stock Exchange

    The largest stock exchange in mainland China, the Shanghai Stock Exchange is a nonprofit organization run by the China Securities ...
  5. Dead Cat Bounce

    A temporary recovery from a prolonged decline or bear market, followed by the continuation of the downtrend. A dead cat bounce ...
  6. Bear Market

    A market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!