The purchase price or monthly rental is only one part of what a business vehicle costs. Total cost of ownership is a more useful way to compare choices.
Include depreciation or rental
For owned vehicles, the biggest cost can be the difference between what you pay and what the vehicle is worth when sold. For leased vehicles, the rentals already reflect much of that cost.
Add energy and fuel realistically
Use real routes and real mileage rather than brochure figures. A small change in pence per mile can become significant across several vehicles.
Maintenance and tyres vary with use
Urban stop-start driving, heavy loads and high mileage can increase wear. Planned servicing is only part of the maintenance budget.
Downtime has a cost too
A cheaper vehicle can be expensive if it is frequently unavailable. Consider replacement vehicles, missed work and staff time.
Insurance belongs in the calculation
Insurance cost can change substantially with vehicle type, use, drivers and claims history. It should be compared as part of the total rather than treated as an afterthought.
Worked example: a £31,000 van
A business buys a van for £31,000 and keeps it for four years. It expects to sell it for £14,000 after 80,000 miles.
| Item | Four-year example |
|---|---|
| Depreciation (£31,000 less £14,000 resale) | £17,000 |
| Fuel (£4,000 a year) | £16,000 |
| Servicing, repairs and tyres (£1,200 a year) | £4,800 |
| Insurance (£1,100 a year) | £4,400 |
| VED, breakdown and miscellaneous (£500 a year) | £2,000 |
| Total four-year cost | £44,200 |
At 80,000 miles, that works out at about 55p per mile before finance interest, tax treatment and downtime.
This is the sort of calculation that can make a more expensive vehicle look cheaper overall if it holds its value better or uses less fuel.