Total cost of ownership (TCO) is the purchase price of an asset plus the costs of operation. Assessing the total cost of ownership means taking a bigger picture look at what the product is and what its value is over time.

When choosing among alternatives in a purchasing decision, buyers often look at an item’s short-term price, known as its purchase price. However they should also consider its long-term price, which is its total cost of ownership. These are the long-term costs and expenses incurred during the product’s useful life and ultimate disposal. The item with the lower total cost of ownership can be the better value in the long run.