Ask anyone what their car costs and they quote fuel. Fuel is often barely a third of it. The honest annual bill for an average UK car runs £3,000–£5,000 — and seeing the breakdown changes decisions about replacement, second cars and that tempting upgrade.
The Real Annual Bill (Typical £25k Car, 8,000 Miles)
- Depreciation: £2,000–£3,000 — the silent giant; a new car loses ~50% in three years
- Fuel: ~£1,150 — 8,000 miles at 45mpg and 145p/litre
- Insurance: £600–£1,000
- Servicing, MOT, tyres, repairs: £500–£800
- VED (road tax): £195 standard rate
Why HMRC Pays 45p a Mile
The mileage allowance is not generous fuel money — it prices the whole package. At 45mpg, fuel is only ~15p/mile; the other 30p is depreciation, insurance, servicing and tyres. If your employer pays less than 45p for business miles, you can claim tax relief on the difference.
The Cheapest Car Maths
Almost always: the reliable one you already own, kept longer. Depreciation falls off a cliff with age — a 6-year-old car loses ~£500/year against a new car losing £3,000. Running an older car with £800/year of repairs still beats new-car depreciation by thousands.