1. Calculate your total annual car expenses:
This includes all costs associated with owning and operating your vehicle. Categorize them for better tracking and future budgeting. The categories might include:
* Fixed Costs (These don't change much based on mileage):
* Loan payments (or lease payments): The monthly amount multiplied by 12.
* Insurance: Your annual premium.
* Registration/License fees: The annual cost.
* Depreciation: This is the biggest expense and hardest to pinpoint precisely. You can estimate it using online depreciation calculators (input your car's make, model, year, and mileage), or use a simpler method like estimating a percentage of the car's value per year (e.g., 15-25%, depending on the vehicle's age and type).
* Variable Costs (These change based on mileage):
* Fuel: Total spent on gasoline or other fuel.
* Oil changes and other maintenance: Include routine maintenance like tire rotations, fluid changes, and repairs.
* Repairs: Costs for unexpected repairs.
* Parking and tolls: Costs associated with parking fees and tolls.
2. Determine your total annual mileage:
Track your mileage using your odometer. Subtract the starting odometer reading from the ending odometer reading for the year.
3. Calculate the cost per mile:
Divide your total annual car expenses (from step 1) by your total annual mileage (from step 2).
Formula:
Cost per mile = (Total Annual Car Expenses) / (Total Annual Mileage)
Example:
Let's say your annual car expenses are:
* Loan payments: $3,600
* Insurance: $1,200
* Registration: $100
* Depreciation: $2,000
* Fuel: $1,500
* Maintenance & Repairs: $800
* Parking & Tolls: $200
Total Annual Car Expenses = $9,400
You drove 15,000 miles in the year.
Cost per mile = $9,400 / 15,000 miles = $0.63 per mile
Important Considerations:
* Accuracy: The accuracy of your cost per mile depends on how accurately you track your expenses and mileage.
* Depreciation: Accurately estimating depreciation is crucial, as it's a significant cost. Using a depreciation calculator or consulting a resource like Kelley Blue Book can help.
* Averaging: The cost per mile will vary from year to year. Consider calculating this over several years to get a more representative average.
* Purpose: Knowing your cost per mile is helpful for budgeting, tax deductions (if self-employed and using the car for business), and comparing the cost of driving versus other transportation options.
By following these steps, you can get a fairly accurate estimate of your auto cost per mile. Remember to adjust the categories and details to accurately reflect your own spending and driving habits.
