How to Calculate the Running Costs for a Car

If you're in the market for a new car, there's a lot to consider. Even if you can afford the initial price tag of a top-of-the-range model, you need to be prepared to budget for higher running costs than a smaller, lower spec'd vehicle. Ongoing costs for fuel, maintenance and insurance need to be anticipated so you know you're able to pay for everything going forward – finding the right car for you within your budget is just one piece of the puzzle. Our advice guide takes a look at how you can calculate the running costs for a car.

Calculating a car's running costs

1. Fuel costs

When deciding on what car to buy, it’s always a good idea to look at the mpg, especially if you’re planning on doing a lot of miles. The higher the mpg, the more efficient the car, and your price per mile will reduce as a result. Diesel engines are often more economical than petrol as you typically get more miles per gallon. Just be aware that diesel often costs a little more at the pumps. Hybrid vehicles will have even better fuel economy, while fully electric vehicles consume no fuel and instead need to be charged – some can manage over 300 miles on a single charge. If you decide to go electric or for a highly economical plug-in hybrid, be sure to factor in the price of powering up and your access to charging points into your running costs. That said, there’s no doubt that a fully electric car will give you the maximum bang for your buck, with costs as little as 4p per mile compared with around 9p per mile for a traditional petrol vehicle.

Take a look at our guide on choosing the right fuel type for you to assess your options.

To work out your fuel cost per mile, run this calculation:

Litres x Fuel price / Number of miles

2. Insurance

Annual insurance premiums can vary a lot depending on what car you have as well as other factors such as your age and driving experience. You can find out a price for your premium even before you buy your car, which will help you to budget your running costs.

Cars are grouped into classifications between 1-50, with higher-powered and large luxury vehicles often appearing at the upper end of the scale. In general, the lower the insurance group, the cheaper the insurance premiums. You’ll have the option to either pay monthly or annually, and it’s really worth shopping around to get the best deal. Take a look at our guides on insurance groups and the best cars for cheap insurance for pointers on which models will give you the best premium.

3. Road tax

Your annual car tax is another factor to add to your running costs. If your car was registered between 2001-2017, the cost will be based on the CO2 emissions, and this can vary considerably depending on the model and engine size. Diesel cars typically have slightly higher emissions than petrol ones, and newer cars often have lower scores than older models.

If you’re buying a car that was made after 2017, the first year’s rate is based on its CO2 and then a standard rate for all vehicles applies. One thing to take into consideration is that you’ll have to pay an additional levy if your car had a list price of over £40,000 and is less than five years old. Buying a car with zero emissions? Then you’ll avoid having to pay an annual vehicle tax fee. Check out the tax rates on the government website for more information.

4. Servicing and MOT

All cars should be serviced regularly, typically around the 12,000-mile mark or annually. The service will keep the engine running smoothly by replenishing consumables such as the oil, filters and coolant, and checking on potential maintenance issues that will affect performance over time. The average cost of car maintenance per year is £273, although this will vary depending on what car you have. Some premium models could cost as much as £500+ to service. It’s best to check out costs with your local dealership and understand if there are any major services due on the car you’re looking to buy. Older cars may be due for a cambelt change for example, which will drive up the costs.

Cars over three years old need to have an annual MOT (unless the car was manufactured more than 40 years ago). This is a legal requirement that makes sure your car remains roadworthy, and you can be fined if stopped while driving without a valid test. The price of an MOT is relatively low, but the test could reveal costly issues that need to be rectified such as a faulty exhaust or tyre wear.

5. Tyres

Most vehicles will need a new full set of tyres every four years if you’re doing average mileage. However, get a puncture and you may need to replace a tyre much sooner! There are many different brands and grades of tyres, so it’s best to check with your manufacturer to see what’s recommended. Larger rims will cost more than a smaller car’s wheels, and run flat tyres also come at a premium. When working out your tyre prices, take into account added costs such as wheel balancing and old tyre disposal. It pays to shop around for the best deal.

6. Parking and tolls

Depending on where you live you may need to commute into an emission zone or drive on a toll road, and this can really affect your annual running costs. If you’re driving into London for example, the Ultra Low Emission Zone runs 24/7 and affects all vehicles except electric cars, petrol cars that meet the Euro 4 standard and diesel engines that meet the Euro 6 standard. Try comparing the costs with public transport to decide whether your new car will be regularly used on these types of roads. Parking charges can also be a hefty ongoing cost to consider, and some councils have different priced parking permits depending on the size of your vehicle.

7. Vehicle age

If you’re considering an older vehicle or one with a lot of miles on the clock, you may need to set aside funds for more maintenance costs. Items such as brake discs and pads will bump up your annual running costs, and bigger ticket items like a new clutch or gearbox could really break the bank. By checking the service history and researching online about potential issues, you can anticipate maintenance costs for your chosen car.

8. Warranty

Understanding what warranty is available with your car can give you peace of mind when trying to work out potential maintenance costs. Generally, a car’s warranty will cover the cost of repairs to the engine and transmission as well as areas like the steering, suspension, aircon and electrics. These warranties do vary though, so check the finer details on the manufacturer’s website.

Manufacturers will often have a three or five-year warranty with new cars, and some will have a mileage limit. If you’d like the peace of mind of a longer term, take a look at Kia, as they offer a fantastic seven-year deal across their range. It can also be transferred to different owners, which isn’t the case for all car warranties.

Budgeting your annual running costs is not the most fun part of buying a new car, but it’s definitely important. Draw up a shortlist of cars that suit your requirements and then weigh up potential running costs to find the right model for you. If you keep these different costs in mind, it’ll make finding your perfect motor that little bit easier.

Latest advice articles

Latest best of articles