When you’re shopping for a new car, it’s easy to get lured in by a tempting deal and signing on the dotted without doing full due diligence on the car. In particular, working out what the car running costs will be over the long term.
Doing that can be quite a daunting process because there’s an awful lot to consider and a lot of numbers to pull together. This guide will hopefully make it all a bit easier. Here, we’ll explain everything you need to take into consideration when calculating a car’s running costs and offer some advice on how you can reduce them.
How much will fuel cost?
There are three figures you need to work this out: your annual mileage, the potential new car’s average fuel economy, and the price of fuel. Let’s look at how to calculate your average annual mileage first.
If your previous car was brand new when you got, just have a look at the mileage readout and divide that number by how many years you’ve had it. If you had an older car, look up its MoT history online to see the mileage at each test. Add up the total mileage during your ownership and divide it by the number of years you’ve owned the car.
Next, you need to know the average fuel economy of your prospective purchase in miles per gallon. You can find the figures in the car’s Parkers review. The one you need is the combined average economy, which most closely reflects real-world driving. The current testing procedure, known as WLTP, isn’t entirely accurate, but it is a good guide.
Having found those two numbers, simply divide your annual mileage by the car’s average fuel economy to see how many gallons of fuel you’ll use in a year.
Then you need to work out how much that fuel will cost. It’s tricky because the price of fuel has been fluctuating significantly of late but use the current average fuel price as a guide. Fuel is priced per litre, so times it by 4.546 to get the price per gallon.
Here’s an example of what the calculation would look like:
12,500 miles ÷ 45.5mpg = 274.7 gallons of fuel used
£1.40 per litre x 4.546 = £6.36 per gallon
274.4 gallons x £6.36 per gallon = £1,745.18 annual fuel cost
There are ways you can lower fuel costs, for instance practicing a more fuel efficient driving style. Or you could get one of the most economical cars on the market.
Is it cheaper to switch to an EV?
Many people are switching from petrol and diesel to electric cars, at least in part to reduce their running costs. Charging an EV’s battery at home is certainly cheaper than filling up with fuel, especially if you switch to an electricity tariff designed for EV owners with lower costs at off-peak times.
Using public chargers is more expensive, though. In some cases, it can cost as much as, or even more than, an equivalent amount of fuel.
If you can mostly charge at home or intend to use a single public charger provider, the process for working out the annual cost of charging an electric car is broadly the same as for fuel. The numbers you need are your annual average mileage, the electric car’s average miles per kilowatt hour (mpkWh) efficiency and the cost per kilowatt hour you’ll be paying for electricity.
So, if you do 12,000 miles per year in an EV that averages 3.5 mpkWh, it’ll get through 3,428.6kW of electricity. At a cost of 27.35p per kWh (the UK average for domestic electricity), you’ll spend £937.72 charging it up.
That’s a significant potential saving over an equivalent amount of petrol or diesel. However, it has to be offset against the higher cash price you’ll pay, or monthly payment you’ll make, for an EV. It could take years for the savings to add up.
How much will your car tax cost?
You have to pay road tax – also known as vehicle excise duty – for your car every year, and that cost should be factored into annual running costs.
There are several pricing structures in place that apply to cars of different ages. The structure that currently applies to brand new cars was introduced in 2017; the prices were updated in 2023.
When you buy a brand new car, you also have to pay the ‘first year’ VED. It’s based on the car’s CO2 emissions and ranges from £0 for an electric car up £2,600 for the most polluting cars. From the car’s first birthday (or year two, as it’s technically known) you pay a flat rate.
VED costs for older cars registered before April 2017 can be lower or higher than the flat rate, depending on exactly what sort of car it is. You can check out the VED rates that apply to any car you’re interested in buying here.
Buying VED is a legal requirement, so you have to pay for it. However, you can reduce the cost by buying a car that incurs a lower fee.
There’s currently no VED to pay on certain electric cars, though that is set to change in 2025. Cars registered from April 2017 that cost more than £40,000 when new (including EVs) incur an extra annual VED charge of £390 per year in years two through six. Cars that emit less than 100g/km of CO2 and were registered between March 2001 and March 2017 are VED-free, as are classic cars more than 40 years old.
You can spread the cost VED by buying it every six months or paying monthly. However, that ends up costing more than buying 12 months’ VED in full. Note that, even if your car’s VED charge is £0, you still have to ‘buy’ it every year, so that it’s properly registered in the system. It’s easiest to buy road tax online.
Compare insurance quotes
Having car insurance is yet another cost that drivers are legally required to bear. Record price rises over the last few years mean the average cost of a fully comprehensive policy is now nearly £1,000. So it’s more important than ever to use a price comparison website to find the lowest-cost deal you can get.
There are ways of reducing premium costs. Young drivers can have their car fitted with a black box. Getting a tracker fitted helps, as well. Increasing the excess can save money, as can changing how you describe your occupation. Getting a car in a low insurance group is an easy win, too.
Ongoing maintenance costs
Maintenance is one of the hardest annual running costs to calculate, because you never know exactly what attention your car will need. But you can at least get an idea.
It’s easy enough if you’re buying or leasing a new car. The vast majority of car manufacturers and leasing companies offer a fixed-price servicing plan as an option. It’ll include all routine servicing and maintenance for a number of years, at a substantial discount. If that’s not available, or you’re buying a used car, ring round some garages and get quotes for a routine service.
You also have to factor in other expenses that may come up, which can often be determined by the car’s mileage. For instance, cambelts typically need replacing every 50,000 to 100,000 miles. Diesels with a manual gearbox usually need a new dual mass flywheel and clutch every 100,000 miles. Tyres generally last about 50,000 miles.
The car’s service schedule notes when bigger jobs are needed; alternatively, a good garage should be able to tell you what’s likely to come up in the near future and how much it’ll cost. Parker’s used car reviews list common faults that might need fixing.
You can reduce garage costs by carrying out your own vehicle health checks and doing basic maintenance tasks, like changing the oil.
Completely unforeseen expenses can crop up, as well, for instance the air conditioning failing. You can mitigate against them by getting an extended warranty for your car. Most car manufacturers offer them on new cars and there are third-party providers like Motoreasy who deal with older cars. Don’t forget about the cost of the annual MoT test, either.
Factoring in your car’s resale value
It’s easy to forget about a car’s depreciation when calculating running costs. But it’s important to remember because it can be the single biggest cost of owning a car.
What do we mean by that? Well, consider that 20% of a car’s list price is VAT, which you lose the instant you take delivery if you’re buying the car outright. After a typical three-year ownership period, a car’s residual value may only be 50% or less of its list price, which add up to a loss of tens of thousands of pounds a year.
That isn’t coming directly out of your pocket, but it is money that you’ll never get back. There are ways of reducing depreciation, though. It’s not so much of an issue if you’re leasing a car, but cars that depreciate a lot generally have higher monthly payments.
How to lower your car running costs
We’ve covered many of the main ways you can lower your car running costs in this article, but here are some of the key points:
- Buy a car that’s very economical.
- Adopt a more efficient driving style.
- Shop around for insurance and look out for ways to reduce your premium.
- Look for a car that incurs a low road tax charge.
- Get a servicing plan and/or extended warranty for your car, if possible.
- Choose a car with a low rate of depreciation.
How do you calculate the running costs of a car?
Let’s quickly recap all the costs we’ve considered here. They are fuel – or electricity if you have EV – road tax, insurance, maintenance and depreciation. Once you’ve worked out those individual costs, add them all together to get the annual total. It might be quite a scary number but spread out over 12 months it should look more manageable.
What is the average cost of running a car in the UK?
Search this question online and you’ll get quite a wide range of answers from various sources. That’s because each estimate takes different things into account. Fuel costs and garage labour rates vary from place to place, as well, so there can be significant variation in average costs between different regions. At a very rough estimate, budget around £3,000 to £4,000 (excluding depreciation) to run your car per year.
How much does car maintenance cost per year in the UK?
This is a virtually impossible question to answer because there are so many variables. For instance, cars that cover high mileages or are in generally poor condition will incur higher maintenance costs than ones in good condition that live gentle lives.
Where you live can have an effect, as well, because local property costs and business rates are a significant factor in a garage’s labour rate. Even within a town, you might get wildly varying quotes from different garages.
Searching online doesn’t provide much clarity, either. You can find sources quoting figures of a few hundred pounds a year, or several thousand. We recommend budgeting around £500 to £1,000 per year for basic servicing and maintenance, but have a contingency in place for any unexpected bills.
Which car brands cost the most to maintain in the UK?
As a rule of thumb, the more expensive a car is to buy, the more it’ll cost to maintain. Exotic sportscars like Ferraris, Aston Martins and McLarens will inevitable rack up large servicing bills throughout their lives, but bills can be high for mainstream fair, as well.
The cost of basic service is usually around £200 at a main dealer, but the price of any parts that need unexpectedly replacing can really escalate. Electrical sensors, for instance, can cost hundreds of pounds each. If a car’s diesel particulate filter needs replacing, the bill can easily run to four figures.
