Total Cost Of Ownership - TCO

DEFINITION of 'Total Cost Of Ownership - TCO'

The purchase price of an asset plus the costs of operation. When choosing among alternatives in a purchasing decision, buyers should look not just at an item's short-term price, which is its purchase price, but also at its long-term price, which is its total cost of ownership. The item with the lower total cost of ownership will be the better value in the long run.

BREAKING DOWN 'Total Cost Of Ownership - TCO'

For example, the total cost of ownership of a car is not just the purchase price, but also the expenses incurred through its use, such as repairs, insurance and fuel. A used car that appears to be a great bargain might actually have a total cost of ownership that is higher than that of a new car, if the used car requires numerous repairs while the new car has a three-year warranty.



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