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Total cost of ownership

Total cost of ownership is the full cost of acquiring, using, maintaining, and disposing of an asset over a stated period, less its resale proceeds or remaining value.

Also called: TCO

by Lee Schmidt

Published October 22, 2026

The sticker price leaves out costs that arrive after you take an asset home, from insurance and repairs to selling fees. A low purchase price does not necessarily mean a low ownership cost. A $20,000 car can cost $30,000 to own over five years after running costs and resale, while the cash needed in any one month looks very different.

In a sentence

  • "My car's five-year total cost of ownership is estimated at $30,000, not its $20,000 purchase price."
  • "The used model has a lower price but a higher estimated total cost of ownership."
  • "I'm using the same mileage and ownership period in both total cost of ownership estimates."

How it's calculated

Total cost of ownership = acquisition costs + operating costs + maintenance costs + financing costs + disposal costs − (resale proceeds or remaining value)

  1. Choose the ownership period and expected use. A car comparison needs the same number of years and miles; an appliance comparison needs a comparable level of service.
  2. Add the purchase price and acquisition costs, such as taxes, delivery, or installation. Then add costs during ownership, including fuel or electricity, insurance, maintenance, repairs, and any loan interest and financing fees.
  3. Add disposal or selling costs, then subtract gross resale proceeds or estimated remaining value. If you use net sale proceeds instead, leave selling costs out of the separate cost line.
  4. Label estimates and assumptions. Repairs and future resale value are uncertain, so a comparison can include a higher-repair or lower-resale case rather than treating one forecast as a guarantee.

Count each cost once. Loan principal is not an extra ownership cost when the full purchase price is already included, and depreciation is not another charge to add after subtracting resale value.

An example

Assume you buy a used car for cash, keep it for five years, and sell it for $10,000. These illustrative estimates exclude any return you might have earned by investing the purchase money instead.

Five-year itemAmount
Purchase price$20,000
Purchase taxes and fees$2,000
Fuel$7,500
Insurance and registration$6,000
Maintenance and repairs$4,000
Selling costs$500
Total cash paid$40,000
Less gross resale proceeds−$10,000
Total cost of ownership$30,000

The $30,000 total averages $500 a month over 60 months, but you need $22,000 at purchase, not $500. The $10,000 resale receipt arrives at the end, so it cannot fund earlier bills.

Why it matters

Total cost of ownership helps you compare buying new with buying used, or owning with renting, on more than sticker price. Hold the time horizon and expected use constant; a five-year ownership total cannot fairly be compared with a one-year rental quote.

For something you use occasionally, dividing the ownership total by expected uses gives you an ownership-based cost per use. That can reveal why a cheap item you rarely use costs more per outing than renting, but the answer still depends on realistic use and resale estimates.

Total cost of ownership versus purchase price

Purchase price is what you pay for the asset itself; total cost of ownership includes the other costs over the period you keep it and subtracts its ending value. A purchase-price comparison leaves out what happens after checkout.

Monthly cash requirements answer a different question—how much money must leave your account, and when? A down payment, full loan payments, and repair bills belong in that cash schedule even though their treatment in ownership cost differs. A cash flow forecast tests whether you can cover the payment dates; an average ownership cost does not.

Common questions

Is total cost of ownership the same as depreciation? No. Depreciation is the loss in an asset's value, while total cost of ownership includes operating and other costs too. If you already count purchase cost minus resale or remaining value, the value loss is already included, so adding depreciation would count it twice.

Do loan payments count toward total cost of ownership? When the full purchase price is already counted, add loan interest and financing fees for the period, not the principal portions of payments. Principal repays the amount already counted at purchase; your cash plan still needs the full payments and any balance due when you sell.

Can I calculate total cost of ownership before selling the asset? Yes. Use an estimate of the asset's value at the end of the chosen period and state how you arrived at it. Remaining value reduces the calculated ownership cost, but it is not cash available for bills while you still own the asset.

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