Calculating the Life Cycle Cost of Your Compressor System

When the need arises to replace an existing air compressor or to purchase an air compressor for a new facility or application, there are several factors that should be considered before making the purchase. Aside from space requirements, flow capacities, noise levels, and other application-based parameters, a major factor that should also be considered is total life cycle cost! When purchasing or upgrading a system, you should try to find a balance between the upfront purchase cost and the long-term associated energy and maintenance costs, though of course the final decision is dependent on your business’ unique needs and requirements.  

What is a Compressor’s Life Cycle Cost?  

A life cycle cost analysis (often abbreviated as LCC) is a comparison tool that is utilized to compare different systems and products; in relation to compressor systems, the LCC is used to evaluate different compressor system options in order to provide guidance on what each option’s potential total investment will amount to. Keep in mind that the LCC is a bit limited, in that it can’t account for unexpected costs or business growth, etc., but is a very useful way to establish a baseline for making an educated decision on which compressor installation would be most beneficial for your company to invest. 

How Do I Calculate the Total Life Cycle Cost of My Compressor? 

There are a few ways to determine the life cycle cost of a compressor system, but one the most common is this simple formula:  

Life Cycle Costs = (Initial Investment) + (Lifetime Maintenance Costs) + (Lifetime Energy Costs) 

Each of these three factors (initial capital expenditure, maintenance costs, and operating costs) play a significant role when calculating the total life cycle cost of a new compressor. We explore each below:  

1. Total Purchase Price. The total purchase price is usually just a small part of the total life cycle cost. It’s important to note that just because a compressor might have a much lower purchase price, that doesn’t mean that it will cost less over its lifetime. A higher initial cost may benefit you, if the associated costs of maintenance, upkeep, and energy usage are lower in the long run. You also shouldn’t forget to include installation costs in the original purchase price. These costs may include electrical wiring, air and water piping, and foundation requirements and can vary depending on the type and model of compressor being selected. 

1. Maintenance Costs. Maintenance costs can vary greatly. They include both labor and parts required to not only keep the compressor running, but to keep up with required maintenance schedules. You should also take into account whether maintenance will be taken care of in-house, or if this will be outsourced to a local compressed air provider. Different manufacturers have different recommended service intervals and component lifetimes, which can have a huge impact on how much money is spent to maintain the compressor over its lifetime.  

1. Energy Efficiency. The energy efficiency of a compressor could potentially save tens of thousands of dollars annually on the electrical costs to operate the unit. Such savings can pay back the purchase price difference in a matter of months, not to mention the savings will be ongoing. It is possible that by the end of a compressor’s life the energy savings will have paid back the entire purchase price of the compressor! 

While there are many factors to consider when purchasing a new compressor, choosing a compressor with the lowest life cycle cost can have the biggest impact on your company’s bottom line. Learn more at www.atlascopco.com/air-usa!