2026-07-31 8 min

Life Cycle Cost Calculator

Calculate the total life cycle cost of equipment including purchase, energy, maintenance, repair, consumables, and salvage value. See the annual equivalent cost and cost share of each component.

Calculator

Unit System

Purchase Cost Help

Initial acquisition cost of the equipment

Annual Energy Cost(/yr) Help

Yearly electricity, fuel, or compressed air cost

Annual Maintenance Cost(/yr) Help

Yearly planned maintenance and service cost

Annual Repair Cost(/yr) Help

Yearly unplanned repairs and spare parts

Annual Consumables Cost(/yr) Help

Yearly filters, lubricants, and consumable supplies

Service Life(yr) Help

Expected service life in years

Discount Rate(%) Help

Rate used to discount future costs to present value

Salvage Value Help

Resale or scrap value at the end of the service life

Results update live as you type

Results

Optimal

Life Cycle Cost

183655.75$

Total discounted cost of owning and operating over the service life

Annual Equivalent Cost

27370.12$/yr

Life cycle cost converted to a level annual amount

Present Value of Operating Costs

107361.30$

Discounted energy, maintenance, repair, and consumables

PV of Energy Cost

40260.49$

Discounted energy cost over the service life

PV of Maintenance Cost

33550.41$

Discounted planned maintenance cost

PV of Salvage Value

3705.55$

Salvage value discounted back to today

Energy Share of LCC

21.92%

Percentage of life cycle cost from energy

Maintenance + Repair Share of LCC

29.23%

Percentage of life cycle cost from maintenance and repair

Visualizations

Life Cycle Cost Components

80,000$Purchase

40,260$Energy PV

33,550$Maintenance PV

20,130$Repair PV

13,420$Consumables PV

LCC Component Shares

Purchase43%

Energy PV21%

Maintenance PV18%

Repair PV11%

Consumables PV7%

Formula

Life cycle cost adds the purchase price to every annual operating cost discounted to present value, then subtracts the discounted salvage value. Annualizing with the capital recovery factor turns the total into a comparable yearly cost.

LCC = Purchase + Σ (Energy + Maint + Repair + Consumables)t / (1 + r)^t − Salvage / (1 + r)^n

Alternative Form

AnnualEquivalent = LCC × CRF, CRF = r(1 + r)^n / ((1 + r)^n − 1)

Variables

Symbol	Name	Unit	Description
Purchase	Purchase cost	$	Initial acquisition cost
Energy	Annual energy cost	$/yr	Yearly electricity, fuel, or air cost
Maint	Annual maintenance cost	$/yr	Yearly planned maintenance cost
Repair	Annual repair cost	$/yr	Yearly unplanned repair cost
Consumables	Annual consumables cost	$/yr	Yearly supplies and consumables cost
r	Discount rate	%	Rate used to discount future costs
n	Service life	yr	Expected life of the equipment
Salvage	Salvage value	$	Resale or scrap value at end of life

Explanation

LCC recognizes that a cheap machine can be expensive to run. Every annual cost is discounted by (1 + r)^t because money spent later costs less in today dollars. The salvage value at the end of life reduces the total. The capital recovery factor spreads the LCC into a level annual amount for direct comparison.

Derivation

The recurring costs form an annuity, so their present value is the annual total times the annuity factor (1 − (1 + r)^−n) / r. The salvage value is discounted by (1 + r)^n. LCC is purchase plus annuity present value minus discounted salvage. The capital recovery factor r(1 + r)^n / ((1 + r)^n − 1) converts the LCC into an annual equivalent.

Step-by-Step Calculation

Follow each step to understand how the result is calculated from your inputs.

Step 1

Compute the present value annuity factor for the recurring costs.

PVAF = (1 − (1 + r)^−n) / r

Result: PV Annuity Factor: 6.71

Step 2

Discount each annual cost by the annuity factor.

PV = Annual × PVAF

Result: PV Energy: $40260.49

Step 3

Discount the salvage value back to today.

SalvagePV = Salvage / (1 + r)^n

Result: PV Salvage: $3705.55

Step 4

Sum purchase and discounted operating costs, subtract discounted salvage.

LCC = Purchase + ΣPV − SalvagePV

Result: Life Cycle Cost: $183655.75

Step 5

Annualize with the capital recovery factor.

AE = LCC × CRF

Result: Annual Equivalent: $27370.12/yr

Final Answer

183655.75

Worked Examples

See how the calculator works with different scenarios.

Scenario

A machine costs $80,000, with $6,000/yr energy, $5,000/yr maintenance, $3,000/yr repair, and $2,000/yr consumables, over 10 years at 8% with $8,000 salvage.

Inputs

Purchase:$80,000

Energy:$6,000/yr

Maint:$5,000/yr

Repair:$3,000/yr

Consumables:$2,000/yr

Life:10 yr

Rate:8%

Salvage:$8,000

Calculation

PVAF = (1 − 1.08^−10) / 0.08 = 6.710081 PV Energy = 6,000 × 6.710081 = $40,260.49 PV Maint = 5,000 × 6.710081 = $33,550.41 PV Repair = 3,000 × 6.710081 = $20,130.24 PV Consumables = 2,000 × 6.710081 = $13,420.16 Operating PV = $107,361.30 Salvage PV = 8,000 / 2.158925 = $3,705.55 LCC = 80,000 + 107,361.30 − 3,705.55 = $183,655.75 CRF = r(1+r)^n / ((1+r)^n − 1) = 0.149029 AE = LCC × CRF = $27,370.12

Result

LCC: $183,655.75, Annual Equivalent: $27,370.12/yr, Energy Share: 21.9%, Maint+Repair Share: 29.2%

Interpretation

Operating costs are 58% of the life cycle cost — more than the purchase price. Energy alone is 22% of the LCC, so an energy efficiency upgrade has room to pay for itself.

Understanding Your Result

Your Result: Life Cycle Cost: 183655.75 $

Typical range: Energy and maintenance typically contribute 40-70% of LCC for machinery. Energy share under 20% indicates an efficient asset; above 35% warrants efficiency upgrades. Annual equivalent costs are best compared between alternatives of equal life.

What This Means

Life cycle cost is the complete, discounted cost of owning and operating equipment: purchase plus all operating costs, minus what you recover at disposal. The annual equivalent spreads that total into a level yearly amount.

Why It Matters

For long-lived equipment, operating costs usually exceed the purchase price. LCC analysis prevents buying cheap machines that burn money in energy and maintenance, and it is required by ISO 15686-5 for major assets.

Professional Interpretation

Professionals use LCC for capital comparisons, machine-hour rates, and replacement studies. The capital recovery factor makes the LCC comparable to lease payments, and component shares (energy, maintenance) identify where cost-reduction effort pays off most.

Recommendations

•Compare alternatives on LCC, not purchase price
•Track actual energy and maintenance data to refine inputs
•Use the component shares to target cost reduction effort
•Compare the annual equivalent against lease or rental offers
•Re-run LCC when utilization or energy prices change

Educational Content

Introduction

Life cycle cost analysis is the standard way to think about equipment cost in engineering economics. It answers the full question: what does this asset cost from the day it arrives to the day it leaves?

Concept Explanation

All future operating costs are discounted to present value using an annuity factor, added to the purchase cost, and reduced by the discounted salvage value. The capital recovery factor converts this total into an annual equivalent for easy comparison across options.

Applications

▸Capital equipment comparison

▸Energy efficiency business cases

▸Maintenance strategy evaluation

▸Lease versus purchase decisions

▸Fleet renewal planning

Benefits

•Reveals hidden operating costs
•Enables fair comparison of alternatives
•Supports ISO 15686-5 compliant analysis
•Identifies energy and maintenance cost drivers
•Produces budget-friendly annual figures

Limitations

•Assumes constant annual costs over the life
•Single discount rate for all years
•Input estimates carry uncertainty

Best Practices

•Use measured energy consumption, not nameplate ratings
•Base maintenance on records from similar equipment
•Review LCC at major life milestones
•Include installation and commissioning in purchase cost
•Document every assumption for auditability

Common Misconceptions

Myth: The cheapest purchase price is the cheapest equipment.

Truth: Energy and maintenance often exceed the purchase price over a long life; LCC reveals the true cost.

Myth: LCC is only for expensive machines.

Truth: LCC applies to any asset with recurring costs — pumps, motors, vehicles, and even lighting retrofits.

Myth: A lower discount rate always lowers LCC.

Truth: A lower rate raises the present value of future operating costs and the discounted salvage, so the effect on LCC is mixed.

Practical Tips

•Measure actual energy draw with a power logger before estimating
•Use maintenance records rather than vendor brochures
•Include installation, rigging, and commissioning in purchase cost
•Compare the annual equivalent against lease rates
•Update the LCC after the first year of real operating data

Common Mistakes

Comparing alternatives of different service lives

Use the annual equivalent cost or repeat the shorter option over a common horizon.

Using nameplate energy ratings instead of measured demand

Log real consumption; ratings assume ideal conditions.

Forgetting consumables and repair costs

Include filters, lubricants, spare parts, and unplanned repairs.

Ignoring the time value of money

Discount all future costs; a zero rate overstates LCC for long-lived assets.

Assumptions

This calculator makes the following assumptions to provide estimates:

Constant Annual Costs: Energy, maintenance, repair, and consumables are constant every year.

End-of-Year Cost Timing: Operating costs are incurred at the end of each year.

Single Discount Rate: One rate applies for the entire service life.

Salvage at End of Life: The salvage value is realized at the end of the service life.

Limitations

Be aware of these limitations when using this calculator:

No Escalation Model: Rising energy prices or aging-related maintenance growth are not modeled.

Excludes Some Costs: Operator labor, downtime, insurance, and disposal are not included.

Input Sensitivity: Results depend heavily on the discount rate and annual cost estimates.

Frequently Asked Questions

Answers to common questions about this calculator.

What does the life cycle cost calculator compute?

It computes total LCC, annual equivalent cost, present value of each cost component, salvage present value, and energy and maintenance shares.

What is life cycle cost?

The total discounted cost of owning and operating equipment: purchase plus all operating costs minus discounted salvage.

How is LCC calculated?

Recurring annual costs are multiplied by an annuity present value factor, summed with the purchase cost, and reduced by the discounted salvage value.

What is the annual equivalent cost?

The LCC converted into a level yearly amount using the capital recovery factor, for comparing assets of equal life.

What is the capital recovery factor?

A factor that spreads a present amount into equal annual payments: r(1 + r)^n / ((1 + r)^n − 1).

What inputs are needed?

Purchase cost, annual energy, maintenance, repair, and consumables, service life, discount rate, and salvage value.

Why is the salvage value discounted?

Salvage is received years in the future, so it must be reduced to its present value like any other future amount.

What discount rate should I use?

Your company cost of capital; ISO 15686-5 recommends the opportunity cost of capital adjusted for risk.

What is a typical energy share of LCC?

For machinery, energy is usually 15-40% of LCC. Below 20% is efficient; above 35% warrants efficiency projects.

What is a typical maintenance share?

Maintenance and repair typically run 15-45% of LCC depending on asset age and reliability.

How does LCC differ from TCO?

They are the same concept; LCC is the standard term in engineering economics and ISO 15686-5.

How does LCC differ from purchase price?

Purchase price is a fraction of total cost; operating costs dominate for long-lived assets.

How does LCC relate to NPV?

LCC is essentially the NPV of costs — discounting future expenses to present value.

Does LCC include operator labor?

No. Add labor as an annual cost if you want it included in the analysis.

What happens at a zero discount rate?

No discounting occurs; LCC is the simple sum of costs minus salvage, and the annual equivalent is a straight-line spread.

How accurate is the result?

The math is exact; realism depends on the annual cost and discount rate estimates.

Can I compare two machines with this calculator?

Yes, run each option and compare LCC and annual equivalent on equal lives.

What if the options have different service lives?

Compare annual equivalent costs, or extend the shorter option over a common horizon.

Why is energy cost in LCC?

Energy is often 20-40% of lifetime cost for motors, compressors, and heated equipment.

What about inflation?

Use nominal costs with a nominal rate, or real costs with a real rate — keep them consistent.

Is this calculator free?

Yes, it runs entirely in your browser, is free, and no data leaves your device.

Can students use this calculator?

Yes, it demonstrates annuity factors, present value, and capital recovery — core engineering economics.

What does "---" mean in results?

An input is empty, zero where not allowed, or non-numeric. Check every field.

How do I include installation cost?

Add installation, rigging, and commissioning to the purchase cost input.

What is the cash flow diagram showing?

The purchase outflow in year 0, level annual operating outflows, and the final year with salvage added.

Why compare the annual equivalent to a lease?

A lease is an annual cost; the annual equivalent puts purchase and lease on the same basis.

How often should LCC be updated?

After major repairs, energy price changes, or utilization changes — and at least every few years.

Does the calculator work on mobile?

Yes, it is fully responsive and works on phones, tablets, and desktops.

What is ISO 15686-5?

The international standard for life cycle costing of buildings and constructed assets, including equipment.

What is the best way to verify the LCC?

Check with a zero discount rate, recompute in a spreadsheet, and validate energy and maintenance against real records.

Related Calculators

Explore more calculators related to this topic.

Related Guides

Deepen your understanding with these educational resources.

ISO 15686-5 - Life Cycle Costing

International standard for life cycle costing methodology

AACE International - Cost Engineering

Professional cost engineering standards and engineering economics methods

Glossary

Technical terms used in mortgage calculations explained in plain language.

Life Cycle Cost: Total discounted cost of owning and operating an asset over its service life.
Annual Equivalent: The LCC spread into equal yearly payments by the capital recovery factor.
Capital Recovery Factor: The factor converting a present sum into equal annual payments over n years at rate r.
Annuity Factor: The present value of $1 paid at the end of each year for n years at rate r.
Present Value: The current worth of a future cost after discounting.
Salvage Value: The resale or scrap value recovered at the end of the service life.
Discount Rate: The rate used to translate future costs into present value.
ISO 15686-5: The international standard for life cycle costing methodology.
Escalation: The growth of costs over time due to inflation or market forces.

Authoritative References

Trusted sources and standards referenced by this calculator.

AACE International - Cost Estimating Standards NIST - Manufacturing Cost Estimation MIT OpenCourseWare - Engineering Economics ISO 15686-5 - Life Cycle Costing Engineering Toolbox - Engineering Economics Investopedia - Time Value of Money

Applicable Standards

ISO 15686-5AACE 17R-97ISO 50006ASMENIST GMP

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Page Information

Last Updated:

2026-07-31

Version:

2.0.0

References:

License:

Free to use for educational and professional purposes.