What is the Total Cost of Ownership (TCO)?
Total cost of ownership is an asset's cost to the purchaser in addition to the costs associated with using and maintaining it.
How Does the Total Cost of Ownership (TCO) Work?
Total cost of ownership (TCO) can be best exemplified by owning a home. In addition to the price of the home (usually expressed in mortgage payments), the homeowner must pay utilities (e.g. heat, water, electricity, and gas), property taxes, insurance, and maintenance costs.
Why Does the Total Cost of Ownership (TCO) Matter?
TCO is an important consideration for any investor, because, though one might be able to afford the price of an asset, one may not be able to afford the associated ownership costs which are ongoing throughout the holding period of the asset. Moreover, failure to maintain pace with the TCO of an asset will result in the loss of its value – both to the investor and to the market.