Everyday Life📅 15 April 2025⏱ 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.
JW
James WhitfieldPersonal Finance & Maths WriterJames has written about personal finance, health metrics, and everyday mathematics for over six years. He holds a BSc in Mathematics from the University of Leeds.
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)