The True Cost of Owning and Driving a Personal Vehicle per Year

When I last calculated the average cost of owning and driving a personal vehicle in the 1980s, it amounted to around ￡3000 per year. Interestingly, the cost was almost the same regardless of whether the vehicle was bought new, used, leased, or even rented. However, this figure has more than doubled in recent years.

The Federal Reimbursement Estimate

As Ned highlighted, the federal government allows about 55 cents per mile for business use. However, the actual cost of owning and driving a personal vehicle is significantly higher.

Based on my 'TED estimate,' which takes into account comprehensive factors including fuel, depreciation, insurance, maintenance, and repairs, the true cost of owning and driving a personal vehicle is over a dollar per mile. This estimate consistently reflects the real expenses associated with vehicle ownership.

United States Government's Estimate

According to figures provided by the US government, the cost of a vehicle for business purposes is estimated to be 0.545 cents per mile driven. The IRS employs a team of analysts and statisticians to come up with this estimate, which they review and modify annually to reflect changes in factors such as gasoline prices.

Factors Influencing the Cost

While the USDA's estimate provides a useful benchmark, it is important to note that the total cost of vehicle ownership can vary widely. Several factors can influence the actual cost:

Fuel Efficiency: Cars with better fuel efficiency tend to incur lower fuel costs. Depreciation: The vehicle's value decreases over time, impacting the overall cost. Insurance: Insurance premiums can vary based on make, model, and driving record. Maintenance and Repairs: Some vehicles require more frequent or expensive maintenance. Vinyl Wraps and Personalization: After-market modifications can add to the total cost.

Real-World Implications

Understanding the true cost of owning a personal vehicle can have significant implications:

Personal Budgeting: Recognizing the full cost of ownership can help individuals budget more accurately. Business Decision-Making: For businesses, understanding the true cost can aid in cost management and policy-making. Environmental Considerations: Recognizing the overall cost of vehicle ownership can also help in reducing carbon footprints.

Conclusion

The true cost of owning a personal vehicle is higher than the federal reimbursement estimate of 55 cents per mile. Whether you are a business owner trying to manage expenses, or an individual looking to budget your finances, understanding the comprehensive costs is essential.