Car running costs and cost of fuel (2023)

Thinking of buying a new car? Or wondering whether public transport could be cheaper than driving? There are lots of costs that come with owning a car. Our handy guide will help you calculate how much your car costs you.

Car running costs and cost of fuel (1)

Types of driving costs

Running costs

The day-to-day costs of actually using the car. This includes petrol and servicing.

Standing charges

Costs related to owning a car and keeping it available to use. You have to pay these whether you use the car or not. This includes things like tax.

In this article:

  • Fuel
  • Tyres
  • Service and MOT
  • Labour and replacement parts
  • Parking and tolls
  • Car tax
  • Insurance
  • Cost of capital
  • Depreciation
  • Breakdown cover
  • Claiming mileage


Car running costs and cost of fuel (2)

Running Costs

Fuel

There are 4 factors that affect your fuel cost per mile:

  • Fuel price
  • Fuel type
  • The car's efficiency (fuel consumption)
  • The way you drive

Diesel’s more expensive than petrol, but you get more miles per gallon. But the bigger the price gap, the longer it’ll take you to recover the extra cost on buying a diesel in the first place. You'll need to be a high mileage driver to make diesel a more economical choice than petrol.

Pump prices vary quite a lot around the country and between brands. Get to know the cheapest in your area and shop around when you're away from home.

(Video) Running Costs Part 1 - Working out miles per gallon (mpg) and fuel cost per mile.

How to calculate fuel cost per mile

Cost per mile (pence) = Litres x Fuel price / Number of miles

Annual running cost (converts to £) = Cost per mile x Average mileage / 100


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Tyre replacement costs

In a 4 year period, a car could go through a complete set of new tyres. When calculating the cost of replacing tyres, include the valve, balance and the disposal charge for the old tyre. Shopping around for tyres can help to keep costs down too, as main dealers will be pricier.

You should also factor in other replacement items like windscreen wiper blades.

How to estimate replacement parts running cost

Annual running cost = Total of all items bought for car

Cost per mile (pence) = Total cost / Annual car mileage x 100


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Service and MOT costs

If your car is over 3 years old, it'll require a yearly MOT. This is a legal requirement and ensures that your car remains road-worthy.

It's not legally required to get your car serviced but it is highly recommended. Although it costs money, a service can make your car more efficient and also helps to flag and fix niggles before they turn into a bigger - and costlier - problem.

How to calculate wear and tear running costs

Annual running cost = Your annual service bill

Cost per mile (pence) = Service bill / Annual car mileage x 100

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Labour and replacement part costs

Labour costs can be charged by garages to cover normal servicing and parts replacement. Labour rates vary a lot depending on where in the country you are as well by brand.

Car parts which might need to be replaced regularly under normal driving conditions include brake materials, oils, filters, bulbs and wipers. However, you might sometimes need to replace a bigger part like an exhaust.

How to calculate labour and parts running costs

Annual running cost = Total of all items bought for car

Cost per mile (pence) = Total cost / Annual car mileage x 100


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Parking and toll costs

This will vary depending on where you live and how you use your car. It could be just a few pounds here and there for parking in city car parks. But, it could be a large regular cost if your commute includes a toll road or you park your car in a station car park and get the train to work.

Check out how much commuting to work will cost before you decide whether to drive or take public transport. We have information on the London Low Emission Zone and the Dart Charge.

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Standing charges

Car tax

Cars registered betweenMarch 2001 and April 2017

(Video) EV vs Petrol Fiat 500 Real Running Costs Over 3 Years. Maths with Geoff.

Car tax is based on the amount of CO2 produced (based on official figures shown on the V5C registration document).

Cars registered afterApril 2017

The first year rate for a brand new car is based on CO2; but thestandard rateis the same for all vehicles except those with zero emissions.

An additional charge is payable for 5 years after the first year on cars with a list price of more than £40,000.

How to calculate tax costs

Annual running cost = Car tax bill

Cost per mile (pence) = Tax bill / Annual car mileage x 100


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Insurance

To get a car on the road, you have to get it insured. Choosing a car in a lower insurance group should mean lower premiums, as may choosing a policy with limited cover.

  • Third partyinsurance is the minimum but only provides basic cover – damage to other property or injury to others where you're found to be at fault. Repairs to your vehicle, theft or damage by fire aren’t covered.
  • Third party fire and theftinsurance gives the same basic cover, plus protection against loss or damage due to fire ortheft.
  • Fully comprehensiveincludes cover for damage to your own vehicle and often includes other benefits, too.

Get quotes comparing different types of cover as fully comprehensive insurance can sometimes work out cheaper, even on an older car.

How to calculate insurance costs

Annual running cost = Your annual insurance bill

Cost per mile (pence) = Insurance bill / Annual car mileage x 100

(Video) Claiming motoring expenses if you're self-employed


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Loan interest and cost of capital

When you buy a new car, you'll either pay up front or borrow money. If you need to borrow to buy a car (whether it's a loan or a finance plan) remember to take into account the interest and other fees.

If you use cash, then any interest you could otherwise have earned on that money by saving it should be taken into account too.

Depreciation

Depreciation – loss in value over time – is easy to overlook, but it’s likely to be one of the biggest costs.

Newer or more expensive cars are likely to cost you more in depreciation but, whatever the car, you can minimise it by:

  • Keeping your car in a good and clean condition.
  • Dealing with minor repairs.
  • Keeping mileage low.
  • Arranging servicing to the manufacturer's schedule.
  • Keeping a comprehensive service record.
How to calculate depreciation costs

Annual depreciation cost = (Value when bought - Current value) / Years owned

Cost per mile (pence) = Depreciation / Annual car mileage x 100


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Breakdown cover

Although it's not a necessity, breakdown cover is highly recommended for peace of mind. The cost will pay for itself when you find yourself stranded on the way to somewhere important.

Our breakdown cover provides 24/7 roadside assistance if your car breaks down. We’ll try to fix it at the roadside and if we can’t, we’ll take you and your vehicle to the nearest garage. Depending on the level of cover you choose, we can also provide onward travel for the rest of your journey.

Take a look at our breakdown cover.

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(Video) Audi R8 Running Costs - Fuel, Tyres, Insurance, Tax, Servicing, etc

Claiming mileage

Approved mileage rates are set by HMRC and reviewed from time to time. If you're looking for mileage costs or mileage rates, you should check their site.

How much your employer will give you for using your own car for company business depends on the employer and is a matter for negotiation as circumstances vary.

FAQs

How do you calculate running cost? ›

COGS = Opening Stock + Purchases + Direct Expenses – Closing Stock. Then, calculate the total operating expenses, as mentioned above. Finally, add COGS and operating expenses to determine the total operating cost of your business.

What is the most expensive part of owning a car? ›

Financing a New Car Is Usually the Most Expensive Part

However, you may also need to pay some other fees in addition to this. Some of these fees can be quite hefty as well. Before buying a new car, make sure you know all the costs involved with purchasing one.

What are the 6 main expenses of owning a car? ›

Calculate the Cost of Owning a Car

True Cost to Own® (TCO®) pricing system calculates the additional costs you may not have included when considering your next vehicle purchase. These extra costs include: depreciation, interest on your loan, taxes and fees, insurance premiums, fuel costs, maintenance, and repairs.

What are the four costs of operating a car? ›

The total cost of owning and operating an automobile include fuel, Maintenance, Tires, insurance, license, registration and taxes, depreciation, and finance.

What are the costs of operating a car? ›

The cost of owning a car also includes insurance, gas, maintenance costs and more. The annual cost of car ownership in 2022 is now $10,728, up from 2021's yearly cost of $9,666, according to AAA's Your Driving Costs study.

What affects the total cost of a car? ›

When you buy or lease a new car, you're likely evaluating the sticker price to figure out what you can afford. But that new car will actually cost you more than that over the long run once you factor in taxes, fees, finance charges, maintenance, insurance and fuel.

What is a running cost example? ›

plural noun. The running costs of a business are the amount of money that is regularly spent on things such as salaries, heating, lighting, and rent.

How do you calculate running costs per mile? ›

Divide your expenses by mileage

Calculating cost per mile becomes a simple equation once you know your mileage and total expenses. Divide your total expenses by the total number of miles driven, and the result is your cost per mile.

What do running costs include? ›

Running costs include fuel, car tax, car insurance costs, car serviced, breakdown cover, depreciation and unexpected costs. Buying a car and running it can be broken into two main parts: 1. Upfront costs to get you on the road.

Can Google Maps calculate fuel cost? ›

The Google Maps app shows fuel or energy-efficiency estimates on some routes based on your vehicle's engine type. The more fuel or energy-efficient the route, the lower your car's fuel/energy usage and CO2 emissions.

How do you calculate fuel consumption? ›

To calculate your car's fuel consumption you have to divide the miles travelled by the amounts of gallons it took to refill the tank of your car.

How do you measure the fuel efficiency of a car? ›

Get the miles traveled from the trip odometer, or subtract the original odometer reading from the new one. Divide the miles traveled by the amount of gallons it took to refill the tank. The result will be your car's average miles per gallon yield for that driving period.

Why do billionaires drive cheap cars? ›

Why are there so many wealthy people who drive average cars? Perhaps because driving expensive cars would attract unwanted attention. Many wealthy individuals become wary of showing their worth with a high-end car after becoming the focus of fraud, theft, or frivolous lawsuits.

What is the most expensive thing to fix in a car? ›

1. The engine. The most expensive part to repair is the car engine. Replacement of a car engine can cost upwards of $10,000 in a small car and even more in a truck or SUV.

How often should you change oil? ›

And while the old rule of thumb was to change your oil every 3,000 miles or so, modern automotive technology has stretched that figure even further. Due to better engineering and better oil formulations, now you can expect between 7,500 to 10,000 miles between oil changes!

What is the 20 4/10 Rule for car cost? ›

It's more like general guidelines and a way to plan for vehicle expenses. Basically, the rule goes that you provide a down payment of 20% of the balance, sign a loan for a four-year period, and pay no more than 10% of your monthly income on car expenses.

What is a good operating cost? ›

The normal operating expense ratio range is typically between 60% to 80%, and the lower it is, the better. “Below 70%, you're doing a really good job of controlling expenses,” says Vice President AgDirect Credit Jerry Auel.

What is cost per mile of running a car? ›

What is the Cost Per Mile of Driving ? Definition: The average cost per mile of driving a car is $0.58, according to the U.S. Department of Energy (DOE).

What three factors affect the price of a car? ›

Analyze the price of consumer credit. Identify the factors that affect the total price for a car including the interest rate, the length of a contract and the size of a down payment.

What determines the cost of a vehicle? ›

In brief, the main factors affecting a used vehicle's price are mileage and condition. Options, location, and color also playing a role.

What affects a car value the most and why? ›

Exterior and Interior condition

The general car's condition can increase or decrease its value dramatically when there is visible or significant damage on the inside (board, seat, and covers, etc.) or outside (crash, bad paint, etc.) will not be able to get a better price as you wish.

What are the big 3 expenses? ›

For most households, the big 3 expenses are housing, transportation, and food. These three categories can take up a huge percentage of your income. Housing in particular is getting more expensive every day.

What are the 3 operating expenses? ›

Some of the most common operating expenses include rent, insurance, marketing, and payroll.

What are the 3 expenses? ›

The next step in setting up a budget is to list your monthly expenses. There are three major types of expenses we all pay: fixed, variable, and periodic.

What are the 5 main expenses? ›

For most businesses, the five greatest expenses are: Staff, physical location, capital equipment, development costs, and Cost of Goods Sold (aka: Inventory).

What are the four main expenses? ›

Before you budget for any of the other monthly expenses, cover what we call the Four Walls—aka the basic necessities you need to survive: food, utilities, shelter and transportation.

What are examples of expenses costs? ›

Examples of expenses include rent, utilities, wages, salaries, maintenance, depreciation, insurance, and the cost of goods sold. Expenses are usually recurring payments needed to operate a business.

What is your highest expense? ›

The largest expense for most Americans is housing. At $1,050 per month, the cost of having a roof over our heads accounts for 21% of a household's monthly budget. Percentage of income is based on after-tax income.

What is most people's biggest expense? ›

According to the BLS survey, the largest expenditures were housing and transportation, which comprised 26 percent and 13 percent of people's take-home pay, respectively. Another big spending category was food, to which 10 percent was devoted.

What is America's biggest expense? ›

Americans spend an average of $5,111 a month. Housing is the typical American's largest expense.

What is a good example of operating cost? ›

The wages or salaries a company pays its employees, including salary employees, hourly personnel and contractors, are operating costs. Operating costs also include the cost of benefits that a company pays to employees, such as health insurance, life insurance, paid time off or other benefits packages.

How do you explain operating expenses? ›

Operating expenses—also known as selling, general and administrative expenses (SG&A)—are the costs of doing business. They include rent and utilities, marketing and advertising, sales and accounting, management and administrative salaries.

What are the two main types of operating costs? ›

Types of Operating Costs

Operating costs are often divided into two categories: variable and fixed. Variable operating costs increase with the output level and decrease as output decreases, while fixed operating costs remain constant regardless of output level. There are many different types of operating costs.

What is the 50 30 20 rule? ›

One of the most common percentage-based budgets is the 50/30/20 rule. The idea is to divide your income into three categories, spending 50% on needs, 30% on wants, and 20% on savings. Learn more about the 50/30/20 budget rule and if it's right for you.

What are basic expenses? ›

Basic living expenses, as the name implies, are ones necessary for daily living. Basic living expenses, as the name implies, are ones necessary for daily living, with main categories including housing, food, clothing, transportation, healthcare, and relevant miscellaneous costs.

What are unnecessary expenses called? ›

Discretionary expenses are often defined as nonessential spending. This means a business or household is still able to maintain itself even if all discretionary consumer spending stops. Meals at restaurants and entertainment costs are examples of discretionary expenses.

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