Everyday Life⏱ 5 min read
How to Calculate the True Monthly Cost of Running a Car
Insurance, tax, fuel, and servicing are just the start. Here is a complete breakdown of every running cost category and how to calculate total cost of ownership per mile.
Most drivers dramatically underestimate what their car costs because they only think about fuel and insurance. The full picture -- depreciation, financing, tyres, and unexpected repairs -- typically makes a car 50-100% more expensive than most owners realise.
The Fixed Costs (Same Every Month)
Depreciation (often the largest cost):
Depreciation = (Purchase price - Resale value) / Ownership months
Buy £18,000 car, sell for £10,000 after 3 years (36 months):
Monthly depreciation: (£18,000 - £10,000) / 36 = £222/month
Finance cost (if on PCP or loan):
Interest on PCP: embedded in monthly payment
Simple loan interest: principal x rate x term / months
Annual fixed costs:
Vehicle Excise Duty (road tax): £0-£620/year depending on emissions
MOT: £54.85/year (maximum legal fee) + any repair costs
Service (minor/major alternating): £150-£400/year averaged
Insurance: £500-£2,000/year (wide range by driver/car)
Variable Costs (Per Mile)
Fuel cost per mile:
Fuel cost/mile = Fuel price / (MPG x 4.546)
(4.546 = litres per UK gallon)
Petrol at 155p/litre (£1.55/L), car does 42 MPG:
Fuel cost/mile = 155 / (42 x 4.546) = 155 / 191 = 0.811p/mile
Or: cost per 100 miles = (100 / MPG) x price per gallon
Price per gallon = 155p x 4.546 = 704p
Cost per 100 miles = (100/42) x 704 = 2.381 x 704 = £16.76/100 miles
Tyre cost per mile:
Set of 4 tyres: £300-£600, lasting 20,000-40,000 miles
At £400 for 25,000 miles: 1.6p/mile
Total Cost of Ownership Example
Mid-size family car, £18,000 purchase, 10,000 miles/year, 3-year ownership:
Monthly depreciation: £222
Finance interest (at 7% over 3 years): £105/month
Road tax (Band D): £26/month
Insurance (average UK): £100/month
MOT: £4.50/month (£54 spread)
Service and maintenance: £25/month
Total fixed: £482.50/month
Fuel (10,000 miles/year at 42mpg, £1.55/L):
10,000 miles / 12 months = 833 miles/month
833 miles / 42 MPG x 4.546 litres/gal x £1.55 = £140/month
Tyres (£400 set, 25,000 mile life): £13.33/month
Total variable: £153.33/month
TOTAL: £635.83/month = £7,630/year = 76.3p per mile
Most drivers estimate 30-40p per mile -- the reality is nearly double.
Electric Vehicle Cost Comparison
EV running costs (home charging, 3-4p/mile electricity):
Home charging at 7p/kWh (night rate), 3.5 miles/kWh:
Cost per mile: 7p / 3.5 = 2p/mile
10,000 miles/year: £200/year vs £1,680 petrol equivalent
Savings: £1,480/year on fuel
But: EV purchase price typically £5,000-£15,000 more
Break-even on fuel savings: 3-10 years depending on price differential
EV still requires:
Road tax (zero for most EVs -- but this will change)
Insurance (often higher than equivalent petrol car currently)
Servicing (lower cost -- no oil changes, less brake wear)
Tyres (similar or slightly higher cost -- heavier cars)