What does a car really cost a year?
Fuel, insurance, tax and servicing added up at current fuel prices, the cost per mile, and the cost most people leave out.
For many drivers the biggest cost of a car is not fuel or insurance but the value it loses. You do not see it each month, but you feel it when you sell or trade in. Here is how quickly cars usually lose value and what that costs you.
The AA says most new cars lose 15% to 30% of their price in the first year, then around 15% to 20% a year for the first five years. The RAC puts the total at 50% to 60% within the first three years.
How the value falls year by year
Each year's loss is a percentage of what the car is worth at the start of that year, so the amount in pounds gets smaller as the car gets older. Here is a £25,000 new car at a gentler and a steeper rate.
| After | 20% then 15% a year | 30% then 20% a year |
|---|---|---|
| 1 year | £20,000 | £17,500 |
| 2 years | £17,000 | £14,000 |
| 3 years | £14,450 | £11,200 |
| 4 years | £12,283 | £8,960 |
| 5 years | £10,440 | £7,168 |
At the gentler rate, three years of ownership costs £10,550, about £293 a month. At the steeper rate it costs £13,800, about £383 a month. That is often more than the fuel and insurance put together.
What makes a car lose value faster
- Mileage. High mileage for the car's age pulls the price down.
- Condition and history. A full service history and a clean MOT record help a car hold its value.
- Make and model. Some models are in steady demand and hold their value far better than others.
- A replacement model. When a new version is announced, the old one usually drops.
- Running costs. Thirsty or expensive cars to run are harder to sell.
- Electric cars. The AA notes that electric cars have historically lost value faster, as new models and prices have changed.
Ways to lose less
Buying a car that is a year or two old means someone else takes the steepest part of the drop. Keeping the mileage reasonable and the service history complete helps when you sell. If you are choosing between buying and leasing, the depreciation you would carry is the number to compare against the lease payments.
Work out your own car
The car depreciation calculator shows your car's value after each year and the cost a month and per mile, using your own percentages. The lease vs buy calculator sets that loss against the cost of leasing, and the running cost calculator adds it to fuel, insurance and servicing.
Sources: The AA, How much do cars depreciate every year?; RAC, How to slow down the depreciation of your vehicle. The table uses example rates, not a valuation. Checked 1 November 2026.
This is general information, not financial or tax advice.
It explains published rules and figures. Your own position depends on your full circumstances,
so speak to a qualified adviser before acting on it.