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HoldingCost

Lifetime cost calculator

The sticker price is just the beginning. See the all-in cost of owning a single asset over its lifetime — purchase, running costs, financing, and resale offset combined.

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Logic updated April 2026

This calculator builds the all-in lifetime cost of owning a single asset across its useful life — purchase price, financing interest, annual running cost compounded by inflation, and resale value at end-of-life. It surfaces the total dollar cost and the effective annual cost so you can compare two purchase decisions on a like-for-like basis.

How this is calculated

Formula 

annualCost(year n) = baseAnnualCost × (1 + inflation/100)^(n-1) ; total = purchasePrice + financingCost + Σ annualCost(n) − resaleValue

Step-by-step

  1. Start with the purchase price as the upfront cost
  2. Add total finance interest (already a sunk number, not amortised year-by-year)
  3. For each year of the ownership period, inflate the base annual running cost by the inflation rate compounded from year 1
  4. Sum the inflated annual costs across all ownership years
  5. Subtract the expected resale value at end of period
  6. Divide by ownership years for an effective annual cost figure
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

  • Annual running cost grows at a constant inflation rate over the horizon
  • Resale value is realised at the end of the ownership period
  • Financing cost is the total interest paid (already a sunk number, not amortised)
  • Taxes and tax deductions are not modelled

What this calculator doesn’t account for

  • Doesn't model unexpected major repairs that exceed the inflated annual figure
  • Doesn't include disposal costs at end-of-life if resale value is negative
  • Doesn't account for replacement cycles within the ownership period — see lifecycle cost calculator for that
  • Doesn't factor in tax deductibility for business-use assets
  • Doesn't model variable inflation rates

Worked example

Owning a $25,000 appliance for 12 years with $5,000 of finance interest, $400/year of running cost, 3% annual cost inflation, and $1,500 resale at end of period.

Input Value
Purchase price $25,000
Finance interest $5,000
Annual running cost (year 1) $400
Cost inflation 3%/year
Ownership 12 years
Resale value $1,500

Total lifetime cost: ~$34,200 — Effective annual cost: ~$2,850

Year 1 cost: $400. Year 12 cost: $400 × 1.03^11 ≈ $554. Sum across 12 years (compound inflation): ~$5,690. Total = $25,000 + $5,000 + $5,690 − $1,500 = $34,190. Effective annual cost: $34,190 ÷ 12 = $2,850/year — meaningfully higher than the $400 nominal annual figure once you include depreciation amortised over the life and the running-cost inflation.

Frequently asked questions

What is lifetime cost?

The total dollar cost of owning an asset over its full useful life — purchase, finance, running costs, and any disposal cost minus resale value. Unlike total cost of ownership over a fixed period, lifetime cost spans the entire economic life of the asset. It's the right framework for evaluating long-term assets like appliances, equipment, or property where the holding period equals the asset's lifespan.

How do I account for replacement cycles?

If you replace the asset multiple times during your planning horizon (e.g., several phones over a 12-year period), use the lifecycle cost calculator instead — that one models replacement cycles explicitly. This calculator assumes a single ownership of one asset over its lifetime; it's the right tool when the asset lasts as long as you want to use it.

Cheap upfront vs expensive durable — which wins?

The calculator answers this: input two scenarios with different purchase prices, lifetimes, and running costs, then compare effective annual cost. A $30,000 appliance lasting 15 years often beats a $15,000 alternative lasting 6 years, because effective annual cost is lower and you avoid the disruption of replacement. Always compare on lifetime cost, not sticker price.

How does discount rate affect lifetime cost?

This calculator uses nominal future dollars without discounting. For investment-grade analysis (NPV-based), apply a discount rate to convert future running costs and resale to present value. Doing so favours assets with lower upfront cost (which avoid early dollar outflows) and higher running cost (because the running cost is in cheaper future dollars). The omission here keeps the calculator simple — fold a discount rate into the inflation input as a workaround if needed.

What about taxes on running costs?

In many jurisdictions, running costs may be tax-deductible for business assets (typically depreciation, repairs, insurance, financing costs), reducing the after-tax cost. This calculator shows pre-tax figures. To estimate after-tax lifetime cost, multiply running costs and finance interest by (1 − marginal tax rate) before plugging into the calculator. Personal-use assets typically don't get tax relief on running costs. Specific rules vary by jurisdiction — consult a qualified tax adviser.

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