Total cost of running a car

A car's price doesn't tell you how much it will cost you to own: here's how to calculate the total cost of running a car

BuyaCar team
Apr 17, 2019

The cost of a car is about far more than the sticker price of a car when you buy it. The amount that it's selling for doesn't really tell you how much a car will cost you to run. Fuel use, insurance, servicing all have an impact, but the most important factor is the value that the car loses over the time you own it – the depreciation.

Calculating the full cost of running a car is quick and simple: here’s how:

 

Total cost of ownership

Working out the cost of running a car is easiest if you’re taking out finance on either a Personal Contract Purchase (PCP) or leasing (also known as Personal Contract Hire or PCH) agreement.

You just have to add the cost of your monthly payments to the rest of the elements:

Depreciation
The value that the car loses during the time that you own it is known as depreciation. This will usually be more than all of the other costs combined.

Insurance
By choosing the right car, with the right equipment, you could save hundreds of pounds a year on your insurance.

Fuel costs
Official mpg figures help you to compare fuel costs between cars, but are only a rough guide, as they are notoriously inaccurate. it's better to find the real-world mpg of your car.

Car tax
If you're buying a used car, then you may well save by buying one that was first registered before 2017 when the car tax rules changed.

Servicing and maintenance
Servicing and MOT inspections are essential: packages offered by many manufacturers help you to budget.

How finance options affect the cost of ownership

If you’re leasing a car on personal contract purchase (PCP) and personal contract hire (PCH), then your monthly payments already effectively cover the car’s depreciation.
In some cases, lease deals also include servicing costs and tax.

For other types of finance – including Hire Purchase (HP) or if you’re buying the car with a loan or our own money – then you’ll need to factor depreciation into the total cost of ownership yourself.

The simplest way of doing so is to use the calculator provided by cap-hpi, which has analysed the cost of owning every car in the road for the past 37 years.

Once you’ve selected the cars that you want to compare then you’ll need to add in the following details:

  • Price
  • Insurance
  • Annual mileage

The calculator will also estimate servicing and maintenance costs, as well as car tax.

Read more about:

Latest car buying advice

  1. Cash vs finance: how to budget for a car

  2. Cheaper used car tax: road tax rules before April 2017

  3. Second-hand HP (Hire Purchase finance)

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