Why is depreciation the largest cost?

Because it is a share of the purchase price every year, and the purchase price is far larger than the annual fuel bill. It is simply invisible until the car is sold.

Does buying used change this much?

Yes. Depreciation is front-loaded, so a three year old car has already taken the steepest part of the curve. The cost per kilometre falls substantially even though everything else stays the same.

Everydayvehicle

Total Cost of Car Ownership Calculator

The full cost of running a car per kilometre and per month, with depreciation included. Depreciation is usually the largest single cost and the only one nobody pays monthly, which is why it goes unnoticed until the car is sold.

Also called: cost of owning a car, car running cost calculator.

Cost a kilometre

₹22

₹22 a kilometre all in, or ₹22,022 a month across 5 years. Depreciation is 667553.63 of the 1321303.63 total, 51% of everything, and it is the only cost nobody pays monthly. The car is worth 532446.38 at the end, having kept 44% of its price. Fuel is 6.56 a kilometre against 22.02 all in, so the cost people track is 30% of the real one. Depreciation is front-loaded, which is why buying at three years old lowers the per-kilometre cost so much.

Total over the period

₹13,21,304

A month

₹22,022

Depreciation

₹6,67,554

Fuel

₹3,93,750

Value at the end

₹5,32,446

Depreciation as a share of the total

50.5%

Fuel alone, a kilometre

₹7

On depreciation

Depreciation is 667553.63 of the 1321303.63 total, 51% of everything, and it is the only cost nobody pays monthly. The car is worth 532446.38 at the end, having kept 44% of its price.

On fuel

Fuel is 6.56 a kilometre against 22.02 all in, so the cost people track is 30% of the real one. Depreciation is front-loaded, which is why buying at three years old lowers the per-kilometre cost so much.

How this is calculated

Cost of ownership

Depreciation ₹6,67,554 (51%)Fuel ₹3,93,750 (30%)Insurance ₹1,25,000 (9%)Servicing ₹75,000 (6%)Parking ₹60,000 (5%)Interest ₹0 (0%)

Where the money goes

Item	Over the period	A month	A kilometre
Depreciation	₹6,67,554	₹11,126	₹11
Fuel	₹3,93,750	₹6,563	₹7
Insurance	₹1,25,000	₹2,083	₹2
Servicing	₹75,000	₹1,250	₹1
Parking	₹60,000	₹1,000	₹1
Loan interest	₹0	₹0	₹0

Method and background

How this is calculated

Depreciation is computed on a declining balance, so a car losing fifteen percent a year keeps about forty-four percent of its value after five and the loss is front-loaded into the first two. That is why the cost per kilometre of a new car is so much higher than of a five year old one, and why buying at three years old removes the steepest part of the curve. Fuel is the cost people track and it is rarely the largest. Adding loan interest completes the picture: financing does not change what the car costs to run but it does change what the ownership costs, and leaving it out understates the total by a substantial margin.

every cost of the period over every kilometre of it, with depreciation the largest term for most owners

D: Depreciation
F: Fuel
I: Insurance

Worked examples

Each of these is asserted on every build. If a change to the engine ever moved one of these answers, the build would fail before the page could print it.

a 12 lakh car kept five years

Purchase price: ₹12,00,000
Years you will keep it: 5
Kilometres a year: 12,000
Depreciation a year: 15%
Fuel efficiency: 16 km/L
Fuel price a litre: ₹105
Insurance a year: ₹25,000
Servicing a year: ₹15,000
Parking and permits a year: ₹12,000
Total loan interest: ₹0

Cost a kilometre₹22

1.2m x 0.85^5 left at the end

Open this example

financing adds to the total

Purchase price: ₹12,00,000
Years you will keep it: 5
Kilometres a year: 12,000
Depreciation a year: 15%
Fuel efficiency: 16 km/L
Fuel price a litre: ₹105
Insurance a year: ₹25,000
Servicing a year: ₹15,000
Parking and permits a year: ₹12,000
Total loan interest: ₹2,00,000

Cost a kilometre₹25

boundary: interest is a cost of ownership even though it is not a cost of running

Open this example

Method and limits

What it assumes

Declining balance depreciation at a constant rate, which is a smoothing of a lumpier reality.

What it deliberately does not model

Depreciation depends heavily on model, condition and market, and the rate here is an assumption rather than a measurement.
Repairs outside the service schedule are not included and rise sharply with age.

Formula version 1.0.0 · definition 1.0.0 · India · Report a problem with this calculator

Frequently asked questions

Why is depreciation the largest cost?: Because it is a share of the purchase price every year, and the purchase price is far larger than the annual fuel bill. It is simply invisible until the car is sold.
Does buying used change this much?: Yes. Depreciation is front-loaded, so a three year old car has already taken the steepest part of the curve. The cost per kilometre falls substantially even though everything else stays the same.