About the Equivalent Annual Cost Calculator
Two machines may cost different amounts and last different numbers of years, so their prices cannot be compared directly. The equivalent annual cost turns the purchase price, the yearly running costs and the resale value into one cost per year. Enter the figures for each option and choose the one with the lower annual cost. Type the purchase cost, life, discount rate, running costs and resale value and the equivalent annual cost appears at once, with a few related figures underneath, and you can copy the result with one tap. The sums run in your browser, so nothing you enter is uploaded.
Updated October 2026
How to use the Equivalent Annual Cost Calculator
- 1Enter the purchase cost, life, discount rate, running costs and resale value.
- 2Pick the units or options from the menus if the equivalent annual cost tool offers them.
- 3Read the equivalent annual cost in the large result box.
- 4Look at the extra rows for related figures.
- 5Press Copy result to keep the answer.
When you need the equivalent annual cost
Businesses use it to choose between replacing equipment now or later, and households use it to compare a cheap short-lived item with an expensive durable one.
A longer-lived asset often wins even with a higher price, because its cost is spread over more years. Include running costs, or a cheap machine that is costly to run can look better than it is.
How the equivalent annual cost is worked out
EAC = present value of all costs ÷ annuity factor, where the annuity factor is (1 − (1 + r)^−n) ÷ r. Present value of costs = price + running costs × factor − resale value ÷ (1 + r)^n. A 10,000 asset lasting 5 years at 8% has an annuity factor of 3.9927, so its EAC is 2,504.56 a year. Adding 500 of running costs a year raises it to 3,004.56.
Every answer on this page comes from that one rule, so you can check any result by hand with a calculator. The figures shown underneath, such as other units, are conversions of the same answer.
- Running costs and resale value
- Annuity factor shown
- Handles zero rate
Mistakes to avoid with equivalent annual cost
Use the same discount rate for all options, and enter the real life of each asset, not the guarantee period. The method assumes you replace the asset with an identical one.
On phone and computer
On a phone, type into the boxes one after another and read the equivalent annual cost underneath; Copy result puts it on the clipboard for a message or a note. On a computer the inputs sit on the left and the answer on the right, so you can change one figure and watch the equivalent annual cost move. The equivalent annual cost calculator works the same on both.
Checking your equivalent annual cost by hand
A good habit is to test the equivalent annual cost calculator with a case you already know. A 10,000 asset lasting 5 years at 8% has an annuity factor of 3.9927, so its EAC is 2,504.56 a year. Adding 500 of running costs a year raises it to 3,004.56.
If your own figures give a surprising answer, repeat the working yourself: EAC = present value of all costs ÷ annuity factor, where the annuity factor is (1 − (1 + r)^−n) ÷ r. Present value of costs = price + running costs × factor − resale value ÷ (1 + r)^n. Small differences usually come from rounding, from mixing units, or from a typing slip in one of the inputs. Comparing options with different lifespans is easier when each is turned into a yearly cost. Use the NPV Calculator to total each choice's value, the Annuity Calculator for steady payments, and the Payback Period Calculator to see how long a purchase takes to pay for itself.
Features
- Same discount rate for all options
- Use the real life
- Benefits must match
- Clear messages when the equivalent annual cost inputs make no sense
- Copy the result with one tap
- Private: nothing is uploaded
Frequently asked questions
How do I calculate equivalent annual cost?
EAC = present value of all costs ÷ annuity factor, where the annuity factor is (1 − (1 + r)^−n) ÷ r. Present value of costs = price + running costs × factor − resale value ÷ (1 + r)^n. A 10,000 asset lasting 5 years at 8% has an annuity factor of 3.9927, so its EAC is 2,504.56 a year. Adding 500 of running costs a year raises it to 3,004.56.
What is the formula for equivalent annual cost?
EAC = present value of all costs ÷ annuity factor, where the annuity factor is (1 − (1 + r)^−n) ÷ r. Present value of costs = price + running costs × factor − resale value ÷ (1 + r)^n. The equivalent annual cost calculator applies it exactly and rounds only the displayed answer to six significant figures.
What does EAC tell me?
The cost of owning the asset per year, after allowing for the time value of money.
Which option should I choose?
The one with the lowest equivalent annual cost, if the benefits are the same.
Does it include tax?
No. Enter after-tax figures if tax matters.
Is this equivalent annual cost calculator free and private?
Yes. It is free, needs no account and runs in your browser, so the numbers you type are not uploaded or stored.