Cost per mile is the most useful single figure in vehicle ownership, because it makes different vehicles and different decisions comparable.
The calculation
Add one year of every cost, then divide by miles driven that year.
| Component | How to find it |
|---|---|
| Depreciation | Value a year ago minus value today |
| Fuel or charging | Total spent over twelve months |
| Insurance | Annual premium |
| Maintenance | Servicing, tires, wipers, fluids |
| Repairs | Unscheduled work |
| Registration and fees | Renewal, inspection, property tax where levied |
| Loan interest | Interest paid, not the whole payment |
Include interest but not loan principal. Principal is buying the asset, not consuming it. Depreciation already captures the consumption.
What the number is good for
Deciding whether to drive or not. Most of the cost is incurred whether or not the car moves, so the marginal cost of a trip is closer to fuel plus a share of maintenance than to the full per-mile figure.
Comparing vehicles. A cheap car driven a lot and an expensive one driven rarely can land closer together than sticker prices suggest.
Evaluating a second vehicle. The fixed costs, insurance, registration, depreciation, apply in full to a car that barely moves. A rarely used second vehicle often has a startling cost per mile.
Mileage reimbursement. If you are reimbursed at a set rate, comparing it against your actual cost per mile tells you whether you are ahead.
A note on the IRS rate
The IRS publishes an annual standard mileage rate for business use, intended to approximate the average cost of operating a vehicle. It is a tax convenience figure rather than a measurement of your specific costs, and your real number can be well above or below it depending on the vehicle. Current rates are published at irs.gov.
Reducing it
The largest levers, in rough order: choosing a vehicle that depreciates slowly, keeping a vehicle longer so depreciation spreads across more years and miles, shopping insurance annually, and doing scheduled maintenance on time so that small items do not become large ones.