Why depreciation is the cost no one sees
A new $32k car loses ~20% in year one and ~50% by year five. That's $16,000 of cost spread across maybe 60,000 miles — about $0.27/mi before you've paid for a single gallon of gas. Most people only think about monthly payment and gas; depreciation is roughly equal to those two combined. The biggest single lever in cost-per-mile math is buying a used car that's already absorbed the year-1 depreciation hit.
EVs: lower fuel, but watch insurance and tires
EVs have ~70% lower per-mile energy cost and ~40% lower maintenance (no oil, brakes last longer thanks to regen). But insurance is 15-25% higher (parts/repair cost), tires wear 30% faster (weight + instant torque), and depreciation is steeper for non-Tesla models. The net is usually 10-25% cheaper per mile than an equivalent gas car — meaningful, but not the 5x cheaper that headlines suggest.
When IRS reimbursement becomes a profit center
If you drive a paid-off, fuel-efficient older car for work and bill at the $0.70/mi IRS rate, you can clear $0.25-0.35/mi in pure margin. The math flips for new luxury vehicles where true cost is $1+/mi and you're losing money on every reimbursed trip. Realtors, sales reps, and gig drivers should run this calculator before negotiating reimbursement vs. company-car options.
The 8,000-mile cliff
Fixed costs (depreciation, insurance, registration, financing) don't shrink when you drive less — they get amortized over fewer miles. A car driven 8,000 mi/yr costs roughly 1.7x per mile compared to one driven 15,000 mi/yr. If you drive under 6,000 miles a year, Uber + occasional rental is almost always cheaper than ownership.
FAQ
Why is my cost per mile higher than the AAA average?
AAA assumes ~15,000 miles/yr and a moderately-priced new car kept 5 years. If you drive under 12k/yr, own a luxury vehicle, finance at a high rate, or live in a high-insurance state (MI, FL, LA, NY metro), your true cost will be well above the $0.61/mi average. Depreciation per mile is the silent killer below 10k mi/yr.
Should I use this number to charge clients?
If you're a 1099 contractor or self-employed and you bill clients for mileage, the safest defensible number is the IRS rate ($0.70/mi in 2025) — that's also what you'd deduct on Schedule C using the standard mileage method. If your true cost is lower, you keep the margin. If higher, you're either driving a too-expensive car for the job or you need to renegotiate.
Does this include cost of capital on the down payment?
No — for simplicity. If you put $10k down on a car, that capital isn't earning ~4-5% in T-bills, so the 'true' all-in cost is roughly 0.5-1¢/mi higher than shown. Material for luxury cars and cash buyers; rounding error for most.
Why is the depreciation curve so steep early?
Three reasons: (1) the dealer markup vanishes the moment you drive off the lot; (2) the gap between new and 'lightly used' is the most valuable used-car segment; (3) most new-car warranty value is consumed in years 1-3 even if you don't use it. Buy a 2-3 year old used car off a 3-yr lease return and you skip 30-40% of total lifetime depreciation.
How accurate is the loan interest estimate?
It uses the average-principal shortcut (price ÷ 2 × rate × term), which is within ~10% of a true amortization schedule. For an exact number, multiply your monthly payment by the number of payments and subtract the loan principal.
What about repairs on older cars?
Maintenance costs roughly double from year 1 to year 8. A reliable Toyota/Honda might run $60/mo for the first 5 years and $150/mo from year 6-10. German luxury (BMW, Audi, Mercedes) and large pickups (F-150, Silverado) routinely exceed $200/mo after warranty. The maintenance input is your single most subjective number — pad it.
Do EVs really cost less per mile?
Electricity at $0.15/kWh × ~3.5 mi/kWh = $0.043/mi vs. gas at $3.50/gal ÷ 28 mpg = $0.125/mi. So fuel alone is ~$0.08/mi cheaper. But EV insurance runs $30-60/mo higher and depreciation has been worse for non-Tesla EVs through 2024-25. Net savings are typically $0.05-0.10/mi over an equivalent gas car.
Is leasing cheaper per mile?
Usually no — leases bake in the steepest part of the depreciation curve plus a money factor (rent charge) that's the equivalent of 6-9% APR. Lease per-mile cost is typically equal to or 10-15% higher than buying the same car and selling at 36 months. The exception is luxury cars with strong residuals and manufacturer subvention, where the lease can be cheaper than buying.
Does this work for motorcycles or RVs?
Same math, but adjust the maintenance line up sharply for motorcycles (tires every 8-12k mi) and the depreciation line for RVs (20-30% loss in year one is normal). Insurance for both varies dramatically by state and rider history.
What's missing from this calculator?
Parking, tolls, cleaning/detailing, accident-related repairs, and the value of your time (commute hours). For a true 'cost of driving' number including the externality of time, add $20-40/hr × annual hours behind the wheel.
How this calculator is built
Independently maintained
Written by Sam Doshi and the RevenueLab editorial team. We don't sell the data feeds this tool is built on.
Sourced from primary data
Benchmarks come from public AdSense / Stripe / IRS disclosures and reader-submitted data — never third-party "$X per view" claims. Full methodology.
Last reviewed
June 2026. We re-check every figure on the platform on a rolling quarterly cycle.
Editorial standards
See our editorial policy and disclaimer. Results are estimates, not advice.