Lapasar
Spend & Cost Management

Total Cost of Ownership (TCO)

Also known as: TCO

Total cost of ownership (TCO) is the full cost of acquiring and using a product or service over its life, not just its purchase price.

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TCO adds up every cost associated with a purchase: the price, plus delivery, installation, training, maintenance, consumables, downtime, disposal and more. A cheaper item can easily have a higher TCO than a pricier one once these ongoing costs are counted.

Buying decisions based on TCO rather than sticker price lead to better long-term value. It is central to strategic sourcing and should-cost analysis, where the goal is the lowest true cost, not the lowest headline number.

Frequently asked questions

What is total cost of ownership?
TCO is the full lifetime cost of a purchase — the price plus delivery, installation, maintenance, consumables, downtime and disposal — not just the upfront price.
Why use TCO instead of purchase price?
Because a lower-priced option can cost more over its life once running and support costs are counted. TCO reveals the true best-value choice.

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