Cost per mile turns a complicated vehicle budget into a number that can be compared between vehicles, routes and replacement options.
Start with annual fixed costs
Finance or depreciation, insurance, vehicle tax and some administration costs exist even if the vehicle travels fewer miles.
Then add variable costs
Fuel or electricity, tyres, servicing and maintenance generally rise with use.
Include realistic downtime
If breakdowns require rentals, overtime or missed appointments, include those costs too.
Divide by business mileage
Use a consistent mileage period. Comparing one unusually quiet month with a full year can mislead.
Use it for decisions, not just reporting
Cost per mile can help compare an older vehicle with a replacement, petrol with electric, or own-fleet use with hired transport.
Worked example: cost per mile
Assume annual vehicle costs of £12,500 and annual mileage of 20,000 miles.
£12,500 ÷ 20,000 miles = 62.5p per mile.
If mileage fell to 12,000 but fixed costs stayed much the same, the cost per mile would rise to about £1.04. This is why under-used vehicles can quietly become expensive even when the monthly finance payment has not changed.