Skip to content
ENExplore Calculators

Life Cycle Cost Comparison Calculator

Work out life cycle cost comparison instantly with clear inputs, formula shown and shareable results.

About Life Cycle Cost Comparison Calculator

Life cycle cost discounts ten years of operating cost at 8% and adds it to purchase price, so a higher capital cost with lower running cost can win. The payback on the capital premium is the figure that decides whether the more efficient option is worth the extra outlay.

Formulas

Annuity factor

Factor = (1 - (1 + r)^-n) / r, with r = 8% and n = 10 years

Life cycle cost

LCC = Purchase price + Annual operating cost x Annuity factor

Payback on premium

Payback = Price difference / Annual operating cost saving

Worked example

With the default values below, Life Cycle Cost Comparison Calculator returns Lowest life cycle cost of $9,360,250.47. Change any input above and every figure here is recalculated in your browser.

Inputs used

Option A purchase price
4,000,000
Option A annual operating cost
900,000
Option B purchase price
5,200,000
Option B annual operating cost
620,000

Results

Lowest life cycle cost
$9,360,250.47
Option A life cycle cost
$10,039,073.26
Option B life cycle cost
$9,360,250.47
Payback on the capital premium
4.29

Step by step

  1. 1Values used
  2. 2Annuity factor
  3. 3Life cycle cost
  4. 4Payback on premium
  5. 5Lowest life cycle cost= 9,360,250.47
  6. 6Option A life cycle cost= 10,039,073.26
  7. 7Option B life cycle cost= 9,360,250.47
  8. 8Payback on the capital premium= 4.29

Assumptions and limits

  • The result is derived only from the 4 inputs listed above. Anything not among them is not part of the calculation.
  • In particular, this calculator does not take inflation or tax into account.
  • Figures are rounded for display to 2 decimal places, so totals built from several rounded parts can differ slightly from the unrounded arithmetic.

How these calculators are built and tested is described on the Methodology page. If a figure looks wrong, please report it.

Frequently Asked Questions

Why discount operating costs?

Because money spent in year ten is worth less than money spent today. Undiscounted totals systematically favour low-capital, high-running-cost options.

Should residual value be included?

Yes if material. Discount the expected disposal proceeds and deduct them from the life cycle cost of each option.

Related Calculators

Life Cycle Cost Comparison Calculator | Calcrivo