The cost of owning a car does not stop at the sticker price, or weekly trips to the gas station -- or even monthly car insurance payments. There are other associated costs, some that you incur daily and others that accumulate over time. Such costs include repairs, maintenance and depreciation.
Total cost of ownership (TCO) is the thorough financial estimate totaling the additional costs that come with owning a car; it includes all operating and maintenance costs until the time the vehicle dies.
Total cost of ownership models have been cited as far back as 1929 in a railway manual. TCO analysis was first applied broadly by the Gartner Group in the late 1980s to determine the cost of owning and deploying personal computers. Intellichoice was the first company in the automotive industry to leverage TCO analysis to determine vehicle ownership cost. This began in 1987 with printed annual guides for both cars and trucks. For years, Intellichoice was the only company that offered vehicle ownership cost data, performing the research in-house.
TCO is now used broadly as the ultimate cost metric of owning certain substantial items. For automotive vehicles, the components of TCO are: depreciation, interest on your loan (financing), taxes & state fees, insurance premiums, fuel costs, and maintenance & repairs. The weightiest factor of total cost of ownership is depreciation. It accounts for nearly 44% of TCO, in a five-year model. The second biggest factor is fuel cost, especially with gas prices escalating seemingly every day. A close third is insurance premiums. Together, these top three factors, depreciation, fuel, and insurance, determine around 80% of total cost of ownership.
Here is a full depiction of the components of TCO and how they relate to the full cost of owning a vehicle.
