Equipment TCO calculator
See the true lifetime cost of a capital asset beyond the upfront price.
Calculator businessLogic updated April 2026
This calculator estimates the total cost of owning a piece of business equipment over its useful life — depreciation, annual maintenance and operating costs, finance interest where applicable, and one-time installation and training costs in year 1. It's the figure to use when comparing buy-vs-lease or competing equipment options on a level playing field.
How this is calculated
Formula
annualDepreciation = (purchasePrice − residualValue) / usefulLifeYears ; year cost = depreciation + maintenance + operating + financeInterest + (year 1: install + training)Step-by-step
- Calculate straight-line annual depreciation: (purchase price − residual value) ÷ useful life years
- Add annual maintenance cost (held flat each year)
- Add annual operating cost (held flat each year)
- If financed: build an annual amortisation schedule on the purchase price over the useful life — the interest portion of each year's payments is the year's finance cost
- In year 1 only, add one-time installation and training costs
- Sum the per-year totals to get the cumulative TCO. The residual value is recovered at the end of the final year, reducing total cost
- Rounding mode
- ROUND_HALF_UP
- Precision
- 20-digit internal precision (Decimal.js), rounded to 2 decimal places for display
- Logic last reviewed
Assumptions & limitations
What this calculator assumes
- Straight-line depreciation: (purchase price − residual value) / useful life
- Maintenance and operating costs are held constant in nominal terms
- Finance cost is modelled as the interest portion of an annual amortisation schedule over the useful life
- Installation and training are incurred in year 1 only
- Residual value is recovered at the end of the final year
- Taxes and inflation are not modelled
What this calculator doesn’t account for
- Does not model maintenance cost growth as equipment ages
- Does not include downtime, opportunity cost, or productivity loss during failures
- Does not factor in tax depreciation deductions or investment allowances
- Does not include disposal costs at end-of-life (recycling, removal, decommissioning)
- Does not model technology obsolescence — older equipment may produce less even when functional
Worked example
A small business buys a $50,000 production machine with a 10-year useful life and $5,000 residual value, financed at 7%, with $2,500/year maintenance, $1,200/year operating, $3,000 install, and $1,500 training.
| Input | Value |
|---|---|
| Purchase price | $50,000 |
| Residual value | $5,000 |
| Useful life | 10 years |
| Maintenance / operating | $2,500 / $1,200 per year |
| Install / training (year 1) | $3,000 / $1,500 |
| Financing rate | 7% |
10-year TCO: ~$80,000 — Annualised: ~$8,000
Depreciation: $4,500/year × 10 = $45,000. Maintenance + operating: $3,700/year × 10 = $37,000. Year-1 install + training: $4,500. Finance interest over 10 years on $50,000 at 7%: ~$19,650. Less residual $5,000 recovered. Total ~$80,000 over 10 years. Note this is much higher than the $50,000 purchase price — running costs and finance can match or exceed the original price over a decade.
Frequently asked questions
What is equipment TCO?
Total cost of ownership — the full cost of owning equipment over its useful life, not just the purchase price. It includes depreciation, financing, maintenance, operating costs, and one-time setup. TCO is the metric to use when comparing equipment options because cheaper-to-buy items often have higher TCO due to running costs.
Buy vs lease — which is cheaper?
Buying is usually cheaper over the full useful life if you can afford the upfront capital and the equipment lasts. Leasing wins when you need flexibility, can't afford the capital outlay, want predictable monthly costs, or expect rapid technology turnover (rotating equipment every 2–3 years). This calculator models the buy path; calculate lease economics separately and compare TCOs.
How to account for maintenance costs?
Use a realistic ongoing figure based on either manufacturer recommendations or industry benchmarks for similar equipment. A common rule of thumb is 5–10% of purchase price per year for mechanical equipment, less for electronics. If maintenance grows over time, model it by adjusting the average upward — this calculator uses a flat annual figure, so set it to the lifetime average.
What is residual value?
The estimated value of the equipment at the end of its useful life — what you can recover by selling, trading in, or scrapping it. Residual value reduces TCO because you're getting some of your original capital back. Realistic residuals are typically 10–25% of purchase price for mechanical equipment, near zero for fast-obsolescence technology.
Why include finance interest?
Because finance interest is real money that leaves your business, even if it doesn't appear on the headline price tag. A $50,000 piece of equipment financed over 10 years at 7% costs about $20,000 in interest — that's 40% on top of the purchase price. Cash purchases avoid this; finance lets you preserve working capital but at a measurable cost.
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