In brief
Total Cost of Ownership (TCO) is the sum of all vehicle costs over the holding period, less its residual value. TCO is the only measure that makes vehicles with different powertrains and procurement methods comparable.
What goes into TCO?
Purchase price or lease payments, interest, insurance, vehicle tax, energy, maintenance and wear, tires, damage costs, and administration costs, less the residual value at the end of the term. For electric vehicles, a share of the costs of charging infrastructure is added; for combustion-engine vehicles, fuel costs fluctuate more strongly.
It is customary to state TCO per kilometer or per month, because only then can different mileages be compared.
Why is the lease payment alone insufficient?
Because it covers only part of the costs. Two offers with the same payment can differ substantially in maintenance coverage, mileage limits, tire replacement, and return conditions. Comparing only the payment therefore favors offers that shift costs into the lease term or to the lease return.
Why do TCO calculations fail in practice?
Because of the data, not the formula. A reliable calculation requires every cost item to be assigned to the individual vehicle, including refueling and charging, workshop invoices, and damage. Without that assignment, TCO remains an estimate based on assumptions and is suitable neither for comparing offers nor for deciding on the optimal holding period.
Further reading
Fleet Management Without Excel Spreadsheets
With the AZOWO Mobility Cloud, you can keep track of your vehicles, costs, and obligations all in one place.
Book a free product demo