Car running costs

11 May

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How much does it cost to own a car?

Car running costs can be a real headache. Research has shown that the UK is one of the most expensive countries in the world to run a vehicle. The combined cost of fuel, insurance, tax, repairs and all the other expenses makes even the most efficient company fleet less cost effective than almost anywhere else in the world. And that’s before you look at the initial purchase price of vehicles – which is often higher than in other countries.

It means that anyone operating business vehicles in the UK is treading a delicate tightrope of expenses with car ownership. To get the maximum cost efficiency a fleet manager has to understand all the potential costs of running cars.

To help you understand car running costs, we’ve drawn up a rough table of the relevant expenses so you can better budget. We’ve allocated percentages to the component elements but please note that these will vary between types and ages of vehicles. We’ve roughly based these figures on a two-year cycle of 40,000 miles, and again the figures will be different for longer car ownership and higher mileages.

55% Depreciation

Age and miles cause the biggest cost of all: depreciation. This usually outweighs all other costs put together. It is usually between 15-35% of the purchase price of any vehicle in the first year, and around 50% over three years. Many owners under-estimate this cost and only discover the true fall in value when they come to dispose of vehicles.

20% Fuel

You biggest day-to-day cost will be fuel. Of course, this can vary widely, from a gas-guzzling HGV or luxury car to a thrifty hybrid, and depending on the type of journeys and workload expected of your vehicle. As it is such as large proportion of the overall cost of owning a car, many businesses use fuel cards to manage such a large pull on expenses. If you’re looking to start using a fuel card for your fleet or looking to switch providers, take a look at comparing our fuel cards on our website.

10% Standing costs

Road tax, insurance and, usually, breakdown cover have to be paid whatever the vehicle and however much you use it.

8% Service, maintenance and repair (SMR)

Again, this figure will rise with the age of a vehicle. New or leased cars and vans are likely to have a service contract or warranty that helps with these costs. However, this is not always the case. For those businesses who want to seek servicing, maintenance and repair elsewhere, companies such as Allstar offer SMR packages to suit which will cover these needs. 

5% Finance cost

Are you paying interest on a loan? Or making lease or rental payments? They will include added interest. Even if you paid the full price in cash you have lost the interest on that cash during you tenure of the vehicle.

2% Other costs

Those annoying extras can add up for anyone owning a vehicle. For example, you usually pay extra for number plates, registration fee and delivery. What about cleaning or, the cost of advertising it for sale? And have you considered the costs of any time that the vehicle is off the road being repaired?

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