Lifetime Cost

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DEFINITION

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.

INVESTOPEDIA EXPLAINS

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.


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