Some purchases create expenses for accessories, electricity, maintenance, insurance, fuel, installation or replacement parts. Together, these amounts make up the total cost of the purchase.
Quick answer
Before you buy, ask yourself this question:
What other expenses will this product create after I take it home?
Not all of these costs can be predicted exactly or plugged into a single calculator. Even so, identifying them before you buy helps you avoid unexpected expenses. Let's take it step by step.
What is the total cost of a purchase?
The total cost is the sum of the initial price and all the expenses needed to maintain, use and replace the product over its useful life.
In simple terms:
Total cost = purchase price + usage costs + maintenance + accessories + other related expenses + electricity/water use, etc…
The price is the amount paid to acquire the product. The total cost is everything it takes out of your budget until you stop using that product.
Concepts used: hidden costs and total cost of ownership
This analysis uses the concepts of hidden costs and Total Cost of Ownership (TCO). The price on the tag is only the initial cost. To estimate the total cost, you also need to consider future expenses, such as energy, maintenance, installation, insurance, accessories, parts, and other costs required to keep using the product.
Think of a car: the costs beyond the price of the car (down payment + financing + interest) and gas include oil changes, maintenance, insurance and taxes. And then there are other, more interesting costs that nobody ever thinks about: the Domino Effect!
The domino effect of a purchase
Some purchases set off a chain of new expenses. The main product may cost only a little more, but require pricier accessories and adjustments.
Example: king bed
A king bed may cost about the same as a regular double bed. But after buying it, you may also need to get:
- king sheets;
- a king comforter;
- a king mattress protector;
- larger pillows or accessories;
- furniture that fits the remaining space;
- suitable transportation if you move.
These expenses are part of the real cost of the decision. The purchase doesn't end when the bed arrives at your home.
Which purchases tend to create other costs?
Appliances
Refrigerators, electric shower heaters, washing machines, dryers and other appliances keep generating expenses after you buy them through energy use, maintenance and occasional repairs.
Car
A more expensive or fancier car can create higher expenses for:
- insurance;
- fuel;
- oil changes;
- maintenance;
- tires;
- service checkups;
- taxes;
- replacement parts.
On imported vehicles, some parts can also be more expensive or harder to find.
Bigger house
A bigger house doesn't just mean more space. It can also increase your spending on:
- electricity;
- heating and cooling;
- cleaning;
- maintenance;
- furniture;
- taxes;
- repairs.
That is the domino effect of a purchase: one initial decision creates lots of smaller expenses that keep showing up over time.
How does energy use affect the cost of an appliance?
Two appliances can have the same price but use different amounts of energy to do the same job.
In that case, the more efficient appliance may have the lowest total cost, because it will keep saving energy every month you use it.
This comparison is especially important for large appliances or ones you use often, such as:
- refrigerators;
- freezers;
- air conditioners;
- electric shower heaters;
- washing machines;
- dryers;
- irons;
- electric ovens.
The refrigerator is a good example because it stays on all day long. A small monthly difference in consumption can add up to a significant amount after several years.
How do you estimate energy costs?
When the manufacturer lists the monthly consumption in kilowatt-hours, use this formula:
Monthly consumption in kWh × price per kWh = estimated monthly cost
To estimate the cost over several years:
Monthly cost × 12 months × number of years = estimated energy cost
Illustrative example
Consider two refrigerators with the same price:
- Refrigerator A: uses 40 kWh per month.
- Refrigerator B: uses 30 kWh per month.
The difference is:
40 kWh − 30 kWh = 10 kWh per month
If the total cost of energy were $1.00 per kWh, the difference would be:
10 kWh × $1.00 = $10.00 per month
(The prices used in these examples are illustrative)
Over ten years:
$10.00 × 12 months × 10 years = $1,200.00
In this example, refrigerator B would save about $1,200.00 over ten years.
The actual result depends on the energy rate, taxes, conditions of use and the consumption listed for each appliance. So check the energy consumption shown on the product's label and use the rate charged on your electricity bill.
When is it worth doing these calculations?
You don't need to calculate the unit price or the cost per use of everything you buy. The comparison is most useful when at least one of these three signs shows up.
1. The product is bought often
It's worth calculating when the product keeps landing back in your cart every week or every month, such as:
- toilet paper;
- diapers;
- cleaning products;
- basic groceries;
- hygiene items.
Usually, you only need to make the comparison once. After you find out which option gives you the best unit price, you can keep making the same choice as long as prices and package sizes stay the same.
2. The purchase will keep creating expenses
Do the math when the product requires:
- refills;
- energy;
- fuel;
- insurance;
- maintenance;
- subscriptions;
- accessories;
- replacement parts.
In these cases, the initial price is only part of the cost.
3. Part of the price may be tied to the brand
Before paying more for a well-known brand, check whether the higher price comes with real advantages, such as:
- better materials;
- greater durability;
- a longer warranty;
- easier repairs;
- better performance;
- positive reviews from long-term use.
A well-known brand may offer quality, but the brand name alone doesn't prove the product will last longer.
When is a detailed comparison not worth it?
The calculation stops being as useful when:
- convenience matters more at that moment;
- you can't afford the more expensive one (yet).
For example, it makes no sense to buy an expensive printer just because its cartridges are cheaper if you print a single document a year. In that case, it may be more economical to use a print shop, a library or another printing service.
The best choice isn't always to buy the cheapest product. Nor is it to automatically pick the most expensive one. The smartest choice depends on the price, how often you use it and all the expenses that will come afterward.
Questions to ask before you buy
Before making a decision, ask yourself:
- Does this product need refills, maintenance or parts?
- How much energy, water, fuel, etc… does it use?
- Do I need to buy accessories to use it?
- Will insurance or installation cost more?
- Does it fit in the space I already have?
- How long do I plan to use it?
- Are there reviews about its durability?
- Would a simpler alternative meet my needs?
- Do I really need to buy it, or could I rent, share or use a service?
Not every cost fits in a calculator. Still, these questions help you spot expenses that don't show up on the price tag.
Frequently asked questions
What are the hidden costs of a purchase?
They are expenses that don't appear in the initial price but come up while you use the product, such as energy, maintenance, accessories, insurance, fuel and parts.
How do you calculate the total cost of a product?
Add the purchase price to all the expenses you expect during the period of use:
Initial price + usage costs + maintenance + accessories = estimated total cost
Can a more expensive appliance be more economical?
Yes. If it uses less energy, needs less maintenance or lasts longer, its total cost may be lower. This needs to be confirmed by comparing the data for each option.
Is it worth paying more for energy efficiency?
It depends on the price difference, the energy consumption, how often you use it and how long you will keep the appliance. The more you use it and the longer it lasts, the bigger the impact of energy efficiency can be.
Do I need to run the numbers before every purchase?
No. Prioritize products you buy often, higher-priced items and purchases that will keep creating expenses after the initial payment.
Look beyond the price tag
The trap isn't buying cheap or paying more for quality. The real trap is deciding by looking only at the initial price and ignoring everything that comes afterward.
Before you buy, think about the product over its entire period of use. Sometimes the lowest price is on the tag. Other times, the real savings only show up in the long run.