Total Cost of Car Ownership
Most ownership sums add up fuel, insurance, tax and servicing and stop there. That leaves out the largest item on the list for almost every car under about eight years old: the value it loses while it sits on the drive. It is in the table below, sorted alongside everything else, at a rate you supply rather than one invented here.
A name, the amount, and how often it is charged: Insurance, 640, a year, Fuel, 95, monthly, Wash, 6, weekly. A cost charged by distance works too — Fuel, 0.14, per mile — and is multiplied by the miles driven. Leave the period off and it is treated as yearly.
Not what it cost when new — what it would fetch this week.
Your figure for this model in this market. Clear it to see the cash costs alone.
A year of this car
$4,894
$408 a month, or $0.61 for every kilometre at 8,000 kilometres a year.
- Value lost$2,100 · 43% · never invoiced
- Fuel$1,140 · 23% · $95.00 a month
- Insurance$640 · 13% · $640.00 a year
- Servicing$420 · 9% · $420.00 a year
- Tyres$260 · 5% · $260.00 a year
- Road tax$190 · 4% · $190.00 a year
- Parking permit$144 · 3% · $12.00 a month
How this was worked out
- Cash costs added up6 lines put on a yearly footing = $2,794
- The value it loses$14,000 × 15% = $2,100
- The two together$2,794 + $2,100 = $4,894
- Spread over the year$4,894 ÷ 12 = $408 a month, ÷ 52 = $94 a week
- Over the distance driven$4,894 ÷ 8,000 kilometres a year = $0.61 a kilometre
Depreciation is the biggest line here at 43% of the total — 1.8 times fuel, the largest bill you actually receive. Nobody sends an invoice for it, which is exactly why it is missing from most people’s idea of what their car costs.
The rate above is the one this page loads with, not a figure for your car. It exists so the first thing you see is a total with the invisible line already in it. Price your own model a year older on a listings site, work out what the drop is as a percentage, and put that in instead.
Two lines can carry the same name without either disappearing — a household with two drivers insured separately, or tyres bought twice in a year — because the table numbers repeats rather than collapsing them into one row.
Finance payments are deliberately absent from the example list. A loan payment is partly the purchase of an asset and partly interest, and only the interest is a cost of running the car; adding the whole payment alongside depreciation counts the same money twice. If you are financing, enter the interest portion for the year and nothing else.
One year at today’s figures. Insurance and servicing both climb as a car ages while the value it can lose falls, so the shape of this table changes every year you keep it, and a big bill that lands once every three years belongs here as a third of itself rather than as nothing. Nothing above is discounted for time, and nothing is converted between currencies or between miles and kilometres — pick the one you drive in above and the figures follow it.
The line that is missing from almost every list
Ask somebody what their car costs and you will get fuel, insurance, tax and servicing. Those four are visible: money leaves an account, a statement records it, somebody notices. The largest item is usually none of them. It is the value draining out of the vehicle while it stands on the drive, charged every single day and collected exactly once — on the morning it is sold or traded, when it is far too late to be surprised.
On this page it is a row in the same table as everything else, sorted by size alongside the fuel bill, at a rate you supply rather than one invented here. For most vehicles under about eight years old it sits at the top of that table, and seeing it there is the entire point of the exercise.
What a year actually looks like
Take a car worth 14,000 today. Fuel at 95 a month is 1,140; insurance 640; road tax 190; servicing 420; tyres 260; a parking permit at 12 a month is 144. That is 2,794 of visible spending, which is the number most people would give if asked.
Now add a decline of 15% on the 14,000, which is 2,100. The year is 4,894, not 2,794 — and the invisible line is close to twice the fuel bill, the largest cost anybody actually receives a bill for. Across 8,000 units of distance that works out at roughly 61 for every hundred travelled, which is a far more useful figure for deciding whether a journey is worth making than the price on the pump display.
Entering the costs, and one to leave out
Each cost goes on its own line with a name, an amount and how often it is charged, so a weekly wash, a quarterly toll account and an annual inspection can all sit in the same list without being converted by hand. Costs charged by distance work too and are multiplied by the yearly figure you give. Two lines may carry the same name — tyres bought twice, or two drivers insured separately — and both survive rather than one quietly vanishing.
Finance payments are deliberately absent from the example. Part of a loan instalment buys the vehicle and part of it is interest, and only the interest is a cost of running anything. Entering the whole payment next to the value lost counts the same money twice and produces a total that would frighten anybody. If you are borrowing, put in the interest for the year and leave the rest out.
Where the totals stop being reliable
Averaging hides the lumps. Tyres, a cambelt, a clutch and a failed inspection do not arrive in even monthly slices, and a year that happens to contain none of them looks cheaper than the ownership really is. Spread the big irregular jobs across the years you expect to keep the car rather than recording only the ones you paid for last year.
The other soft spot is the decline itself, which is an estimate about a future nobody can see. An older, cheaper car has little value left to shed, so the running costs dominate and the total is fairly stable. A nearly new one has a great deal to lose, and the answer swings hard on a rate that is genuinely uncertain. That asymmetry is the real argument for buying something a few years old.
Depreciation you never actually realise
Should depreciation count if I am never going to sell?
Yes, though it arrives differently. A vehicle kept until it is scrapped has still consumed its entire purchase price, just spread across a longer period, and the sum only stops mattering if you keep it forever. Running the numbers over a very long horizon usually shows exactly how much that patience is worth.
Why is my cost per unit of distance so high?
Because most of the total does not care how far you drive. Insurance, tax, permits and the bulk of the value loss accrue whether the car moves or not, so covering a small distance spreads a large fixed cost over very few units. Drivers doing modest annual mileage often pay several times what a high-mileage driver pays per unit travelled.
Does this cover an electric car?
The structure does. Replace the fuel line with charging, adjust servicing downward, and be careful with the decline rate, because battery technology, charging networks and incentive schemes have moved second-hand values in ways no historic figure captures. That is another reason the rate here is a field rather than a constant.
How do I compare two cars with this?
Run it once for each and compare the totals rather than the monthly payments. A cheaper car with a steeper decline and dearer insurance can easily finish the year above a costlier one, and only the full list makes that visible. Keep the distance and the currency identical across both runs.