Total cost of ownership: compare products by cost per year, not sticker price
The sticker price is only the first payment. For anything you keep for years, consumables, electricity, repairs and how long it lasts often matter as much as the price.
The formula
Cost per year = (purchase price + running costs over its life) / years of use
Worked example
| Product A | Product B | |
|---|---|---|
| Purchase price | $120 | $160 |
| Running cost per year | $20 | $14 |
| Expected life | 5 years | 7 years |
| Total over life | $120 + $20 x 5 = $220 | $160 + $14 x 7 = $258 |
| Cost per year | $44.00 | about $36.86 |
Product B costs $40 more up front but about $7 less per year. If B lasted only 5 years the result flips: ($160 + $70) / 5 = $46 per year. The lifespan estimate is the most sensitive input, so be conservative.
How to estimate lifespan
- Warranty length and how long the maker stocks spare parts
- Whether replacement filters or parts are easy to buy
- Reports from people who have owned the product for years
- Whether your needs may change (moving, household size)
Checklist
- Write down price, consumables, electricity and repairs separately
- Use a cautious lifespan
- Subtract the resale value if you can resell it
- Put every candidate in the same table and compare cost per year