What Does It Really Cost to Run a Car? The Full Annual Bill

Fuel Is the Visible Cost, Not the Largest

Fuel gets the attention because you hand over money for it every fortnight and watch a number climb on a screen. Depreciation usually costs more, and it never once asks you to get out and pay.

A realistic annual bill for a three-year-old car doing 10,000 miles looks like this:

Depreciation: £1,667
Fuel at 45 mpg: £1,465
Insurance: £600
Vehicle Excise Duty: around £195
MOT: £55
Servicing: £300
Tyres, repairs and consumables: £400

Total: roughly £4,682 a year, or 46.8p a mile.

Fuel is 31% of that. The other 69% arrives as a loss on resale, an annual renewal, or a bill you did not plan for.

Depreciation: The Cost You Never Pay Directly

Depreciation is the gap between what you paid and what you get back, spread over the years you owned it.

Annual depreciation = (purchase price − resale value) ÷ years owned

The curve is steepest at the start, which is the whole argument for buying used:

A £25,000 car worth £12,500 after three years has lost £4,167 a year. The same car bought at three years old for £12,000 and sold at six for £7,000 costs £1,667 a year — the identical vehicle, for 40% of the depreciation.

This is also why monthly finance figures mislead. A PCP payment is largely depreciation plus interest, repackaged so it arrives in instalments rather than as a shock at resale. The money leaves either way; the only question is whether you notice.

Fuel: Work It Out Per Year, Not Per Tank

Annual fuel cost = (annual miles ÷ mpg) × litres per gallon × price per litre

A UK gallon is 4.546 litres, so at £1.45 a litre a gallon costs £6.59.

10,000 miles at 45 mpg: 222 gallons, 1,010 litres, £1,465.

Economy matters more than most people price in. Over the same 10,000 miles, 35 mpg costs £1,883 and 55 mpg costs £1,198 — a £685 spread, every year, for the same journeys. Over a five-year ownership that is £3,400, which is a meaningful share of the purchase price difference between two cars.

Electric: Where You Charge Matters More Than What You Drive

An efficient EV does about 3.5 miles per kWh, so 10,000 miles needs roughly 2,857 kWh. What that costs depends almost entirely on where the electricity comes from:

Off-peak home charging at 7.5p: £214
Standard home rate at 25p: £714
Slower public charger at 49p: £1,400
Rapid public charger at 79p: £2,257

The spread between the cheapest and dearest is more than tenfold, for identical miles in an identical car. Against £1,465 of petrol, an EV charged overnight at home saves around £1,250 a year, while one charged mainly at rapid chargers costs more than the petrol car it replaced.

This is the single most important fact about EV running costs, and the one the headline comparisons tend to skip: the saving is a property of your driveway, not of the car. Note too that electric cars no longer escape Vehicle Excise Duty, and that their higher purchase price feeds straight back into the depreciation line above.

The Fixed Costs, Briefly

Insurance varies more than any other line, by age, postcode, vehicle group and claims history. Treat £600 as a mid-range placeholder and use your actual renewal.

Vehicle Excise Duty runs a little under £200 a year for most cars, with a surcharge for several years on vehicles that cost over £40,000 new. Rates are revised each April, so check the current figure rather than one quoted in an article.

The MOT is capped by law at £54.85 for a car, and many garages charge less to win the repair work that follows.

Servicing runs from about £150 for an interim service to £400 or more for a major one with filters and fluids. Tyres are the cost people forget entirely: a set lasts perhaps 20,000 to 30,000 miles, so budget a few hundred a year rather than meeting it all at once.

Cost Per Mile Is the Only Number That Compares

Annual totals cannot be compared between people who drive different distances. Divide by the miles and you get a figure that can:

Cost per mile = total annual cost ÷ annual miles

On the figures above, 46.8p a mile. Drive 20,000 miles instead of 10,000 and the fixed costs spread twice as thinly, so the per-mile figure falls even though the total rises. That is why low-mileage drivers often pay the most per mile and are the people for whom not owning a car adds up soonest.

The Trap: Average Cost Against Marginal Cost

Here is where the arithmetic misleads people in both directions.

The car costs 46.8p a mile on average. But for one extra journey, with the car already bought, insured and taxed, the cost is fuel and a slice of wear: around 14.6p a mile. The average is more than three times the marginal.

Use the wrong one and you get the wrong answer twice over:

Deciding whether to drive or take the train today, the marginal cost is the honest comparison. The depreciation and insurance are already spent whatever you do.
Deciding whether to own the car at all, the average is the honest one — the whole £4,682, against taxis, car clubs and rail for the journeys you actually make.

Mixing them up is how people conclude both that driving is nearly free and that giving up the car would save nothing. Both feelings come from applying the right number to the wrong question.

Working Out Your Own

Depreciation: look up what your car is worth now and what the same model fetches a year older. The difference is this year's cost.
Fuel: annual miles ÷ mpg × 4.546 × price per litre. Use your real mpg from a brim-to-brim fill, not the brochure figure.
Fixed costs: add insurance, VED, MOT and servicing from your actual paperwork.
Wear: divide the cost of a tyre set by the miles it lasts, and add a repair allowance that grows with the car's age.
Divide by your mileage to get a per-mile figure, and keep the fuel-only figure separately for journey decisions.

Conclusion

The bill is dominated by two numbers that never appear on a receipt: depreciation, which is the largest single cost for most drivers, and the gap between average and marginal cost, which decides whether any individual journey is worth making.

Work out both once a year. Put your mileage and economy into a Travel Cost Calculator for the fuel line, and compare two cars on L/100km rather than MPG if you want a figure that is proportional to what you will actually burn.

Try our Travel Cost Calculator

Try our Fuel Efficiency Converter

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