Buying a car with the lowest purchase price is often not the best financial decision. There are many post-purchase costs that should be considered, including:

• Running Costs (e.g. fuel, oil, tyres etc.)
• Support Costs (e.g. servicing, repairs, spares etc.)
• Replacement Costs (e.g. depreciation, disposal etc.)

Even when purchasing a car, it may be important to consider Modification Costs covering, in effect, the subsequent implementation of new requirements; these could include the fitting of a tow-bar or air-conditioning.

Life Cycle Costing (LCC) is the discipline for analysing all the costs of ownership so that the lowest total cost can be achieved.

A fundamental objective of most major system procurements is usually that total costs over the complete life-cycle should be as low as possible - given that the system requirements (including performance) are achieved.

The procurement of major systems differs from the private purchase of a car in many key ways; typically the acquisition and in-service costs are derived from different budgets. Sometimes they are considered to be parts of the separate Capital and Revenue cost budgets respectively. There is a growing recognition that increased acquisition costs can lead to lower overall life-cycle costs, and therefore emphasis is now placed on LCC assessment rather than simply selecting the system with the lowest purchase cost.