Total Cost of Ownership

Anyone who has ever purchased a car can tell you that it often costs you as much money to drive it as it does to purchase it. The term "total cost of ownership" (TCO) is used in many different industries but has recently been popularized by the automobile industry. In addition to the purchase price you are also responsible for insurance, licensing, maintenance, gasoline, fluid and filter changes, new tires, and even costs associated with reselling it. The upkeep costs on a vehicle can be astronomical. In a business setting, this term often refers to the costs associated with purchasing, installing, and maintaining computer systems. In fact, when the term was originally coined in the '80s it was exclusively used to refer to the costs of information systems. The TCO for a computer system can include purchase price, support, service, maintenance, downtime, safety, productivity, disposal and software costs, among other things. Unlike with a feasibility report and other financial measures, there is no one, set formula to determine the TCO. It is important to include all costs that pertain to the asset or service you are considering investing in. This will give you the most reliable TCO possible.

When used correctly, the TCO method can ensure that all costs associated with the purchase of an asset are considered prior to the purchase. Whether it is a truck, computer, or a building, it is always important to know how much money the ownership of an asset will cost you in the long run.

Continue to read further about financial modeling.

TCO and the Feasibility Report

All companies should invest some time into researching the viability of a project, plan, or business prior to implementing it within the business. A feasibility report takes various financial projections and incorporates them into a format that assists in determining if it is possible to turn a profit from the endeavor. There are many factors that must be included in a feasibility study, including the total cost of ownership, time frame, and available funds.