Lifetime cost definition
/What is Lifetime Cost?
Lifetime cost is the sum total of all expenses related to a purchase over its expected life. These costs include the original acquisition price, as well as subsequent maintenance, upgrades, insurance, and operating costs related to the purchase. An organization should always calculate the lifetime cost of an asset before purchasing it. As noted in the following examples, it can sometimes make sense to calculate lifetime cost and see if there are less expensive alternatives available before making a purchase decision.
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Examples of Lifetime Cost
A good example of this concept is a laser printer, since the lifetime cost of the toner cartridges needed to operate it greatly exceeds the original purchase price of the printer itself. Another example is a vehicle, which has many lifetime costs associated with it - including gasoline, oil changes, licensing, insurance, inspection fees, tire replacements, parking fees, car washes, and other maintenance as parts fail. In total, the ongoing operating costs of a car can exceed the original purchase price.