Cost Per Mile: The Five Costs That Decide What a Car Really Costs to Run

Cost per mile is the number that decides whether a car is actually cheap to run, and it is almost never the number on the window sticker. Two vehicles with the same purchase price can differ by 20 cents per mile once fuel, depreciation, insurance, and maintenance are counted — which over 15,000 miles a year is a $3,000 annual gap.

You can compute your own figure with our fuel economy calculator, but the formula is simple enough to do by hand once you know which costs belong in it.

The Full Formula

Cost per mile = (annual fuel + annual depreciation + annual insurance + annual maintenance + annual tax/fees) ÷ annual miles driven

Most people count only the first term. Fuel is usually the smallest of the five once depreciation is included.

A Worked Comparison

Two cars, both driven 15,000 miles a year, both held for five years:

Cost component	Compact sedan ($28,000)	Midsize SUV ($42,000)
Fuel (35 vs 24 mpg at $3.40/gal)	$1,457	$2,125
Depreciation (5-yr, 55% vs 50% retained)	$3,080	$4,200
Insurance	$1,450	$1,780
Maintenance and repairs	$700	$950
Registration and fees	$250	$380
Annual total	$6,937	$9,435
Cost per mile	$0.46	$0.63

The gap is 17 cents per mile, or about $2,500 a year, and fuel accounts for only 43% of that difference. Depreciation is the largest single line in both columns — a fact that surprises most buyers, because it is invisible on a monthly payment.

Why Used Cars Often Win on This Metric

Depreciation is front-loaded: a new car typically loses 20% of its value in year one and roughly 15% in each of the next two. Buying a three-year-old car means someone else absorbed the steep part of that curve, which commonly drops the depreciation line from $3,000-4,000 a year to under $1,500. Maintenance rises in compensation — expect $900-1,400 annually from years four to eight — but rarely by enough to offset the difference.

You can model the depreciation side specifically with our car loan affordability calculator, which factors the payment against the same total-cost baseline.

Common Mistakes

• Using the posted highway MPG. Real-world economy runs 10-20% below the EPA figure. Use your own trip computer average over at least 1,000 miles.
• Ignoring insurance differences. Insuring an SUV instead of a sedan commonly costs $300-400 more a year, and performance trims can double it.
• Comparing cost per gallon across regions. With the national average near $3.40 and states ranging from $2.90 to $5.20, the same car has very different running costs depending on where it is registered.
• Forgetting tires. A set of four averages $600-900 and lasts 40,000-60,000 miles — that is roughly 1.5 cents per mile that almost never appears in a budget.

Frequently Asked Questions

Does the IRS rate tell me my true cost? The 2026 standard mileage rate is 70 cents per mile for business use. That figure is deliberately generous — it blends a new mid-size vehicle’s full cost profile with a fixed component, and it is designed as a tax deduction, not a personal benchmark. A paid-off compact car typically costs 30-40 cents per mile to run.

Should I count the purchase price? No — count the depreciation instead. The purchase price is a capital outlay; the value you actually consume each year is the amount the car loses. Counting both double-counts.

How do I compare leasing? Divide total lease payments plus down payment plus end-of-term fees by the miles allowed. A $399/month lease with $3,000 down and 12,000 miles a year works out to $0.66 per mile before fuel and insurance, which is usually above the ownership equivalent for the same vehicle class.

For travel budgeting specifically, the simpler per-trip figure is covered by the loan calculator when financing the vehicle, and by the full calculator library for the surrounding budget math.