North America

Calculating Total Cost of Ownership and profitability

The total cost of ownership (TCO) of an industrial diesel engine is vital to your overall profitability so it’s too important to leave to gut-feeling or vague estimates. In some applications, it can be complicated process, but it is worth getting right.

“If you can quantify how much you’re investing upfront, and how much an engine will cost over its lifecycle, then you’re in a much better place to evaluate if an engine is right for you or not,” says Arturo Garcia Aliaga, Application engineer, Volvo Penta. “Often the purchase price might only be 4-5% of its TCO, and the other 95% is fuel consumption. With that in mind it does not make sense to buy an engine that is 20% cheaper if it consumes 7% more in fuel. Nor does it make sense to buy a cheap engine if its poor reliability and durability costs you more in repairs and lost uptime.”

Often manufacturers can assist in the process and are best positioned to know how their products will perform. “We have tools where we can simulate the cycles that the engine will run – if they’re predicable and consistent – and through that simulate what the likely operational costs in fuel consumption will be,” explains Arturo.