Calculating the real annual cost of a vehicle

Ownership costs can arise even when the vehicle is driven less: depreciation, registration, insurance, finance and some servicing. Usage costs move more directly with kilometres, including fuel or charging, tyres, tolls and maintenance linked to wear.

Keeping the groups separate helps explain why a vehicle with excellent fuel economy can still be expensive if its purchase price, depreciation or insurance is high.

Depreciation is the difference between what the vehicle costs and its expected resale value, adjusted for the period of ownership. It is not a cash bill each month, but it represents value consumed and should be included when comparing buying choices.

Use a conservative resale range rather than one precise forecast. Age, kilometres, condition, market supply and model demand can produce a materially different sale price.

Enter the household's actual annual kilometres, fuel economy and recent local price. Add state registration, a real insurance quote and a maintenance allowance based on the vehicle's age and service schedule. Do not use the ATO cents-per-kilometre deduction rate as though it were the actual cost of every private vehicle.

Use the same ownership period and annual kilometres when comparing vehicles. Include any home charger, battery warranty, premium fuel requirement or major scheduled service that differs between options. The best comparison shows a range and identifies the assumptions driving the difference.