--- title: What is the total cost of ownership (TCO) of an asset? description: Total cost of ownership of an asset is a useful way of comparing different maintenance strategies. Here we tell you how it is calculated. image: https://resources.homyze.com/hubfs/christopher-bill-rrTRZdCu7No-unsplash.jpg --- [![Homyze logo (65 px High)](https://resources.homyze.com/hubfs/Homyze%20logo%20(65%20px%20High).png)](https://www.homyze.com) - [WHAT WE DO](https://www.homyze.com/what-we-do) - [THE HOMYZE SOLUTION](https://www.homyze.com/the-homyze-solution) - [CASE STUDIES](https://www.homyze.com/case-studies) - [BLOG](https://resources.homyze.com) - [ABOUT](https://www.homyze.com/about-homyze) [LOG IN](https://app.cleverly.works) [CONTACT US](https://www.homyze.com/contact-us) residual value # What is the total cost of ownership (TCO) of an asset? Total cost of ownership of an asset is a useful way of comparing different maintenance strategies. Here we tell you how it is calculated. [Homyze](https://resources.homyze.com/author/homyze) Apr 29, 2021 --- According to Wikipedia, ‘Total Cost of Ownership’ is defined as follows: “A financial estimate intended to help buyers and owners determine the direct and indirect costs of a product or service.” Essentially, it is designed to be a reflection of the costs that can be attributed to assets and would normally constitute the following components:  1. **Acquisition Costs** 2. **Operating Costs** 3. **Personnel Costs** Total Cost of Ownership is therefore a more holistic measure of the cost of control and use of an asset and will differ from the price of the asset which would normally only be equal to the acquisition costs element.  Total Cost of Ownership is a useful to measure when assessing the optimum maintenance strategy as it should allow for comparison between the costs of each if managers can create a ‘control’ asset which is constant across the different [maintenance strategies](https://resources.homyze.com/what-is-preventative-maintenance).  ### Acquisition Costs This is the amount paid for the asset itself (after commissions or any other associated costs). This would normally be decreased by the [residual value](https://resources.homyze.com/what-is-the-residual-value-of-an-asset) of an asset but this is not known (only estimated) up until the point of final sale or disposal. ### Operating Costs These are the costs required to run the asset and may include subscription of licence fees as well as the maintenance costs. Assets can be maintained by a number of different maintenance strategies and this decision will impact the operating costs (as well as potentially the residual value).  ### Personnel Costs Personnel overhead includes any administrative staffing or support personnel required in order to operate or maintain the equipment. When comparing the total cost of ownership, for example versus outsourced production, one should also apportion costs for the facility housing the asset in order to reflect true ownership costs.  [residual value](https://resources.homyze.com/tag/residual-value) [facilities management](https://resources.homyze.com/tag/facilities-management) [asset management](https://resources.homyze.com/tag/asset-management) [maintenance strategies](https://resources.homyze.com/tag/maintenance-strategies) ## Similar posts facilities management ### [What is predictive maintenance?](https://resources.homyze.com/what-is-predictive-maintenance) Homyze looks at what predictive maintenance is, what is needed to calculate it, and what are the benefits of using Homyze Apr 26, 2021 residual value ### [What is the residual value of an asset?](https://resources.homyze.com/what-is-the-residual-value-of-an-asset) The residual value of an asset. How is it calculated and why is it important to monitor in facilities management Homyze Apr 26, 2021 IoT ### [What is the Internet of Things (IoT)?](https://resources.homyze.com/what-is-the-internet-of-things-iot) What is the internet of things and how is it used within facilities management? 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