The true cost per mile of owning a car is your total yearly car spending divided by the number of miles you drive in that year. Total spending should include fuel, insurance, maintenance, tires, registration and fees, parking and depreciation, which is the value the car loses over time. Many people count only fuel, but fuel is often less than half the full cost. Knowing your real per-mile figure helps you judge trips, commutes and even whether you need a car at all.
The Costs to Include
Car costs fall into two groups. Running costs rise with every mile you drive. Fixed costs stay roughly the same whether the car moves or sits in the driveway.
Running costs
- Fuel: miles driven divided by miles per gallon, times the price you pay per gallon.
- Maintenance: oil changes, brakes, filters and other service.
- Tires: the cost of a set spread over the miles it lasts.
Fixed costs
- Insurance: your yearly premium.
- Registration and fees: these vary widely by region.
- Parking: at home, at work or both.
- Depreciation: the drop in the car’s value each year.
If you have a car loan, the interest is also part of the cost of ownership. Some people add it as a separate line.
Estimating Depreciation
Depreciation is the cost people forget most, because no bill arrives for it. One simple way to estimate it is to look up what similar cars sell for at your car’s current age and at one year older. The difference is a rough yearly depreciation figure. Another approach is to take what you paid, subtract what you expect to sell it for, and divide by the years you plan to keep it.
A Worked Example
Illustration only, using hypothetical numbers.
Imagine a driver who covers 10,000 miles a year in a car that gets 25 miles per gallon. That means 400 gallons of fuel, and at a hypothetical $3.50 per gallon, fuel costs $1,400 for the year.
| Cost item | Yearly cost | Cost per mile (10,000 miles) |
|---|---|---|
| Fuel | $1,400 | $0.14 |
| Insurance | $1,200 | $0.12 |
| Maintenance | $500 | $0.05 |
| Tires | $200 | $0.02 |
| Registration and fees | $100 | $0.01 |
| Parking | $300 | $0.03 |
| Depreciation | $2,500 | $0.25 |
| Total | $6,200 | $0.62 |
In this illustration, each mile costs $0.62, while fuel alone is only $0.14. A 20-mile round trip to visit a friend costs about $12.40 in total ownership terms, not the $2.80 that fuel alone would suggest.
The running costs here are fuel, maintenance and tires, which total $0.21 per mile. That is a useful figure for deciding about one extra trip, because the fixed costs will be paid either way. The full $0.62 matters more when you are deciding whether to keep the car or replace it with other ways of getting around.
How to Work Out Your Own Number
- Note your odometer reading. Do it today and again in a year, or estimate from past service records.
- Gather a year of costs. Use receipts, bank statements and your insurance and registration documents.
- Estimate depreciation. Use one of the methods above.
- Add it up and divide. Total yearly cost divided by miles gives cost per mile.
- Split running and fixed costs. This shows what each extra mile adds.
Common Mistakes
- Counting fuel only: it is often a minority of the total.
- Ignoring depreciation: it can be one of the largest single costs, especially in the early years.
- Using one month’s fuel spending: fuel prices and driving patterns change across the year.
- Forgetting irregular costs: a major repair or new tires can raise one year’s total sharply.
Your cost per mile is one of the most useful numbers in a household budget. It takes an hour or so to calculate, and it changes how you see every trip. Work it out once a year, and you will have a clear basis for decisions about driving, commuting and your next car.