The dream of car ownership often comes with promises of freedom and convenience, but there’s also a range of expenses to consider. Many people think of gas and car payments as their main costs, but hang on — there’s more to consider! Understanding how much your car really costs per mile can help you make smarter financial decisions. Let’s break down the different factors that answer the question: how much does your car really cost per mile?
Gas Costs
Let’s start with the obvious expense. Gas is the first thing that comes to mind when thinking about the cost of driving. Depending on where you live and what car you drive, the price of gas can vary. A fuel-efficient car, such as a hybrid or compact, can help reduce costs, but larger vehicles like trucks and SUVs will need more fuel.
Calculating your car’s miles per gallon (MPG) is a good starting point. For example, if your car gets 30 MPG and gas costs $4 per gallon, you’re spending about 13 cents per mile on fuel alone. However, gas is just one piece of the puzzle.
Maintenance Costs
Regular maintenance is essential for keeping your car in good condition. Oil changes, tire rotations, and brake checks are just a few of the routine tasks that can add up over time. You know that if you neglect this aspect of car ownership and don’t pay for these services, you’ll wind up with an even bigger maintenance bill later on.
While these may not be daily expenses, they should be factored into the overall cost per mile. For instance, if you spend $500 a year on maintenance and drive 12,000 miles annually, that adds roughly 4 cents per mile to your costs. Neglecting maintenance can lead to even higher repair bills down the road, so it’s wise to stay on top of these small but important tasks.
Depreciation Costs
Depreciation is often overlooked when calculating the cost of driving, but it’s one of the largest expenses. As soon as you begin driving your new car, it starts losing value — on average, about 9 percent as soon as you drive it off the lot! 1
On average, a car can lose about 20% of its value in the first year alone. If you buy a car for $30,000 and it’s worth $24,000 a year later, that $6,000 drop in value equals 50 cents per mile if you drove 12,000 miles. Granted, depreciation isn’t an out-of-pocket expense like gas or maintenance. However, since it still affects your bottom line, it’s something to keep in mind when evaluating the actual cost of ownership.
Insurance Costs
Insurance is another cost that adds to your per-mile expenses. The premiums you pay will depend on a multitude of factors, such as your driving record, the type of car you drive, and where you live.
The average American pays nearly $1,800 per year for car insurance. Therefore, if they drive 12,000 miles annually, the cost of insurance per mile would be around 15 cents. 2 While you can’t control all the factors that affect your insurance premiums, shopping around for the best rate can help reduce this expense. Adding safe driving discounts or bundling your insurance with other policies can also save you money.
Tolls, Parking, and Registration Fees
Beyond the major expenses like gas, maintenance, and insurance, there are other smaller costs that can add up over time. Tolls, parking fees, and vehicle registration fees all contribute to the true cost of driving.
If you frequently drive in areas with toll roads or need to pay for parking, these costs can quickly add up. For example, if you spend $300 a year on tolls and parking combined, that’s another 2.5 cents per mile on top of your other expenses. Vehicle registration fees vary by state, but they’re another cost to keep in mind when calculating your per-mile expenses.
Financing Costs
If you financed your car, interest on your loan is another factor that contributes to your overall cost per mile. The amount you pay in interest depends on the loan amount, interest rate, and loan term. But it can accumulate quickly!
For example, if you borrow $25,000 at an interest rate of 4% over five years, you’ll pay approximately $2,600 in interest. That’s about 4.3 cents per mile if you drive 12,000 miles a year. This is money that doesn’t go toward paying off your car’s principal but still adds to the total cost of ownership. Refinancing at a lower interest rate or paying off your loan faster can reduce this cost over time.
The True Cost of Driving
When you add up all the factors, the true cost of driving goes far beyond just filling up your tank. Gas, maintenance, depreciation, insurance, and other smaller expenses all contribute to the total cost per mile. So, now that you’ve done the calculations, how much does your car really cost per mile?
This knowledge can help you budget more effectively, make informed decisions about your driving habits, and even consider whether alternative transportation options might save you money in the long run. Understanding the full picture will help you take control of your driving costs and plan your finances more wisely.