Life Cycle Costing

The concept of Life Cycle Costing has been endorsed by the National Institute of Governmental Purchasing (NIGP), the National Association of State Procurement Officials (NASPO) and other governmental associations. It's a simple calculation that lets you compare options from a total cost perspective.

To estimate Life Cycle Costs:

  1. Begin with the initial purchase price (less trade-in value for old equipment).
  2. Add scheduled maintenance costs.
    Find information in Operation and Maintenance Manual.
  3. Add expected repair costs.
    Information comes in form of quote for warranty or extended warranty.
  4. Add fuel costs.
    To improve data accuracy, share application information with all bidders and request fuel consumption data from historical records or on-board technologies.
  5. Subtract residual value.
    Be cautious with guaranteed buy-backs as they are only exercised if you buy your next piece of equipment from the vendor offering it.


Initial Purchase Price - Trade-in + Maintenance + Repairs + Fuel - Resale Value = Life Cycle Cost

This calculation can be customized to include other factors such as productivity, uptime and downtime. The more factors you include, the more confident you can be in the evaluation process.




Buying heavy equipment for a governmental agency? Save time and improve decision-making with the latest tools and information from Caterpillar.

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