Cost Per Mile Calculator
Add up a year of running costs and divide by a year of driving. The answer is usually three or four times what people assume, because fuel is the smaller part of it.
Cost per mile
$0.53
- Total per year
- $6,360.00
- Per month
- $530.00
- Fuel for the year
- $1,360.00
- Everything else
- $5,000.00
- Fuel as a share
- 21%
- Fuel is 21% of the real cost here, so pricing a journey at the pump understates it by about 4.7 times.
- Depreciation is usually the largest line and the easiest to forget, because nobody writes a cheque for it. Take what the vehicle has lost in value over a year.
- Costs that do not vary with distance still divide by it. Drive half as far and the insurance is the same money over fewer miles, so the cost per mile rises.
About the true cost of a mile
Most people price a journey at the pump, and the pump is roughly a fifth of the story. Everything else a vehicle costs is bought by the mile too, even though none of it is paid for by the mile.
Depreciation is the largest line for most vehicles and the easiest to overlook, because nobody ever writes a cheque for it. It is simply what the vehicle has lost in value over the year, and on anything under about five years old it usually exceeds the fuel by a wide margin.
Insurance, tax, servicing and tyres are the rest. They are mostly fixed — they cost the same whether you drive 5,000 miles or 20,000 — which produces the result people find least intuitive: driving less makes each mile more expensive. The costs do not shrink, they just divide by a smaller number.
The figure this produces is what a mileage reimbursement rate is trying to approximate, and comparing the two is instructive. If your cost per mile comes out well below the approved rate, the rate is working in your favour; well above it, and you are subsidising your employer.
What it works out
- Cost per mile or kilometre, everything included
- Total per year and per month
- Fuel as a share of the real cost
- Fuel, insurance, tax, servicing, tyres and depreciation
The formula
Cost per mile = (Fuel + Insurance + Tax + Servicing + Tyres + Depreciation) ÷ Distance
Everything the year cost, divided by everything the year covered.
12,000 miles at 30 mpg burns 400 gallons, which at $3.40 is $1,360 of fuel. Insurance, servicing, tyres and depreciation add $5,000. The year comes to $6,360, or $530 a month — and $0.53 a mile.
Fuel is 21% of that. Pricing a journey at the pump understates it by nearly five times, which is the single most useful thing on this page.
The behaviour of the fixed costs is the part worth sitting with. Drive 6,000 miles instead of 12,000 and the fuel halves to $680, but the $5,000 does not move — so the year costs $5,680 and each mile now costs $0.95. Halving the driving raised the cost per mile by nearly four fifths.
That is why a second car used lightly is expensive per mile however efficient it is, and why the cheapest mile is generally the one driven in a vehicle you were paying for anyway.
- Depreciation
- What the vehicle lost in value over the year. Usually the largest line and the easiest to forget.
- Servicing
- Routine servicing plus a realistic share of repairs. Averaging three years is better than using last year.
- Distance
- Miles or kilometres driven in the year. Two consecutive service readings will give it.
A worked example
12,000 miles a year in a 30 mpg car: $1,400 insurance, $500 servicing, $300 tyres and $2,800 of depreciation.
That works out to $0.53 .
- Total per year
- $6,360.00
- Per month
- $530.00
- Fuel for the year
- $1,360.00
- Everything else
- $5,000.00
- Fuel as a share
- 21%
Questions
How much does it really cost to drive a mile?
On the figures here, $0.53 — $6,360 a year over 12,000 miles. Fuel is only $1,360 of that. The exact answer depends heavily on the vehicle's value and how far you drive.
Why is fuel such a small part of it?
Because depreciation, insurance, servicing and tyres are all bought by the mile even though they are not paid for at the pump. On these figures fuel is 21% of the total.
How do I work out depreciation?
Take what the vehicle was worth a year ago and subtract what it is worth now. Trade valuation sites will give both. On a new car the first year is by far the steepest and can exceed every other cost combined.
Does driving less save money per mile?
It saves money in total but raises the cost per mile, because the fixed costs divide by fewer miles. Halving 12,000 miles to 6,000 takes the year from $6,360 to $5,680, but the cost per mile rises from $0.53 to $0.95.
How does this compare to a mileage rate?
A mileage reimbursement rate is an attempt to approximate exactly this figure across an average vehicle. If your real cost per mile is above the approved rate you are subsidising the travel; below it, and the rate is in your favour.
Should I include the cost of buying the car?
Through depreciation rather than as a purchase. The purchase is not a cost — it converts money into a vehicle. What the vehicle loses in value each year is the cost, and that is the depreciation line.
What about finance or lease payments?
If you are financing, use the interest as a separate cost and keep depreciation separate, or the capital gets counted twice. On a lease it is simpler: the payments already contain the depreciation, so enter them and leave the depreciation field at zero.
Is an electric car cheaper per mile?
On energy and servicing, usually. On depreciation, often not. Run the figures for both here rather than comparing fuel against electricity alone, since that is the smaller part of the total for either.