Total Cost of Ownership (TCO): what it is and why it matters

What is Total Cost of Ownership and why should you consider it?

Total Cost of Ownership (TCO), or total cost of ownership, is a crucial concept in the economic evaluation of goods and services, particularly in the context of vehicle purchases. This approach focuses not only on the initial purchase price, but on all expenses associated with an asset throughout its life cycle. TCO was developed by Gartner in 1987 to calculate the total costs of computer equipment, but its application has expanded to various sectors, including automotive and industrial.

Why TCO is crucial for informed purchasing

Considering TCO is critical to gaining a complete view of the costs associated with an asset. Often, buyers focus solely on the initial price, overlooking other significant expenses that can accumulate over time, such as costs for fuel, maintenance, insurance, and depreciation. Ignoring these aspects can lead to unwise financial decisions and unplanned expenses in the long run. According to research conducted by Frost & Sullivan, TCO can exceed the initial purchase price of a vehicle by up to 60 percent over its useful life.

TCO advantages for electric cars compared to conventional vehicles

Initial price: how incentives change the rules

Although the purchase price of an electric car may be higher than an internal combustion vehicle, national and local governments offer numerous tax incentives and purchase discounts. These can include tax deductions, direct subsidies and road tax rebates. For example, in Italy and Spain, various incentives have been provided at various times in recent years, sometimes reducing the purchase cost by as much as several thousand euros. These benefits make the purchase of an electric car more accessible and affordable in the long term.

Fuel costs and long-term savings

The costs of recharging an electric car are generally much lower than those of traditional fuel. For example, recharging an electric car to travel 100 km can cost up to 60 percent less than using gasoline or diesel. As much as the cost of energy is extremely variable depending on the historical moment, the country under consideration, and many other factors (whether we are recharging a car at home or at a public charging station, for example), these savings translate into lower operating costs overall, contributing to a more advantageous TCO.

Reduced maintenance for lower TCO

Electric cars require less maintenance than internal combustion vehicles. They do not require oil changes or frequent filter and spark plug replacements. In addition, thanks to regenerative braking, brake wear is greatly reduced. According to a study by the Society of Automotive Engineers, maintenance costs of electric cars can be up to 30 percent lower than those of conventional cars. This reduction in maintenance costs further contributes to a lower TCO.

Competitive insurance costs

Insurance policies for electric cars tend to be cheaper due to their greater reliability and lower risks of mechanical failure. Motorists can save hundreds of euros a year on insurance premiums while depending on several factors. In addition, many insurance companies offer special rates for electric vehicles, further incentivizing the choice toward this type of car.

Residual value: how it is changing for electric cars

With increasing demand and growing interest in sustainable mobility, the residual value of electric cars is growing. Longer-lasting batteries are helping to maintain the car's value in the used car market. According to research conducted by Kelley Blue Book, electric cars have seen a 20 percent increase in residual value in recent years, making them increasingly attractive even several years after purchase.

Milan Polytechnic's analysis

In 2022, a study conducted by the Politecnico di Milano analyzed in detail the TCO of electric cars compared to other types of motorization. The paper titled "Factors affecting cost competitiveness of electric vehicles against alternative powertrains: a total cost of ownership-based assessment in the Italian market" written by Simone Franzò, Alessio Nasca and Vittorio Chiesa highlighted how the availability of comparative economic analysis can increase potential customers' awareness of the economic benefits of electric cars.

The analysis is based on a simulation model that includes variables such as purchase costs, operating costs during use (including fuel), and costs associated with vehicle end-of-life. The study showed that considering all these factors allows for a more accurate assessment of the economic competitiveness of electric cars compared to traditional engines such as gasoline and diesel.

Conclusion: why TCO is critical for those who want to buy an electric car

Considering Total Cost of Ownership provides a comprehensive view of the costs associated with a car, going beyond just the initial price. Elements that influence TCO-such as low fuel costs, minimal maintenance, and tax incentives-often make electric cars a financially advantageous choice.

We at Powy support the transition to electric mobility by providing affordable and innovative charging stations. Investing in an electric car is not only a sustainable choice but also a strategic decision that can generate significant savings over time. With increasing environmental awareness and favorable government policies, now is an ideal time to seriously consider purchasing an electric vehicle.

About Powy

Powy is a company that owns, develops and operates Italy's leading independent network of public charging infrastructure for electric vehicles, with a growing presence in Spain as well.

Founded in Turin, Italy in 2018, Powy is at the center of the transition to more sustainable mobility, offering an innovative charging infrastructure that uses only 100 percent renewable energy.

Powy 's network includes quick, fast, and ultra-fast charging solutions strategically placed in public and private parking lots, supermarkets, shopping malls, and transportation hubs to ensure maximum convenience and accessibility for EV drivers. Each station is equipped with advanced technologies to provide a reliable and efficient charging experience.

Learn more: wpowy.energy