The economics of… New car versus old car: the costs by mileage
Edition 5 · 3 October 2026 · figures dated below · next review 2027-04-06
A worked comparison of a £3,000 used car and a £40,000 new car bought with cash, a personal loan or PCP, for drivers doing low, average and high annual mileage.
- The scenario
One used car costing £3,000, one new car costing £40,000, compared over a five-year ownership period — the length of the new car's warranty. The used car costs £1,000 a year in repairs, as given. Insurance is assumed identical for both and is left out of every sum below, as are fuel and servicing, which depend on the specific models rather than on age. Vehicle tax is mentioned separately because it does differ by registration date.
- What each route costs over five years, bought outright
Car Buys at Worth after 5 years Repairs over 5 years Net cost over 5 years Per year Used car, cash £3,000 £500 £5,000 £7,500 £1,500 New car, cash £40,000 £16,000 £0 (under warranty) £24,000 £4,800 The new car's resale value after five years is assumed at 40% of its price, within the 40–50% range Which? reports many new cars retain over that period. The used car's residual value is assumed to fall to £500 as it nears the end of its useful life.
- Financing the new car instead of paying cash
Few people pay £40,000 upfront, so here is the same car financed two ways over five years, using a representative unsecured personal loan rate and a representative PCP rate for deals of this size.
Route Upfront Monthly Term Total paid Minus resale/GFV Net cost over 5 years Per year Personal loan, 7.9% APR £0 £809 60 months £48,550 £16,000 £32,550 £6,510 PCP, 9.9% APR £4,000 deposit £556 60 months £37,360 (incl. deposit) n/a (hand back, or pay the £16,000 GFV to keep it — same net cost either way) £37,360 £7,472 The personal loan rate used here (7.9%) is a representative rate for an unsecured personal loan, drawn from Bank of England quoted interest rate data, applied to this loan size as an illustrative simplification; Bank Rate itself currently sits at 3.75%. The PCP rate (9.9%) is a representative example APR for this kind of agreement. PCP works out more expensive here than the loan because interest is paid for five years on a balance that includes the £16,000 guaranteed future value, without the buyer ever owning that equity unless they pay the balloon.
A smaller loan to buy the used car instead of paying cash — say £3,000 over 3 years at a higher small-loan rate of 12.9% APR — costs about £101 a month, £3,630 in total, pushing its five-year net cost (loan repayments plus repairs, minus resale) to about £8,130, or £1,626 a year.
- Where mileage changes the sums
The used car's £1,000-a-year repair bill is taken as flat across all mileages, as set out in the brief. The new car's warranty and resale assumptions are also held flat. The one place mileage bites directly is PCP: these agreements set an annual mileage allowance, commonly in the 6,000–10,000 mile range, with an excess-mileage charge for going over it, typically a few pence up to around 30p a mile depending on the car. Using a mid-range allowance of 8,000 miles a year and an illustrative excess charge of 10p a mile: a driver doing 12,000 miles a year covers 60,000 miles in five years against a 40,000-mile allowance — 20,000 miles over, adding about £2,000 to the PCP deal, taking its net cost to £39,360 (£7,872 a year). Drivers doing 4,000 or 7,000 miles a year stay within the allowance and pay no excess. The DfT's National Travel Survey puts the average car's annual mileage at around 7,000 miles a year, which is why that figure sits in the middle of this comparison. Most new-car warranties also cap the mileage they cover, so very high-mileage drivers should check that limit separately; it is not modelled here.
- The break-even points
Rather than a verdict, here is what the used car's repair bill would have to average, each year, for its five-year total to match each new-car route (all else held as above):
Compared with Used car's repairs would need to average New car, cash £4,300 a year New car, personal loan £6,010 a year New car, PCP (4,000 or 7,000 miles/year) £6,970 a year New car, PCP (12,000 miles/year, with excess mileage) £7,370 a year The brief's stated £1,000-a-year repair figure sits well below all four thresholds. Which?'s reliability survey work shows that faults and repair costs tend to rise as a car gets older and does more miles, so a genuinely high-mileage older car could see repair bills above £1,000 a year in practice — moving it closer to, though in most cases still someway under, these break-even levels.
- Four households on the same arithmetic
Household Situation Mileage/year Used car, 5y net cost New car cash, 5y net cost New car loan, 5y net cost New car PCP, 5y net cost Tom & Sam Renters, no driveway, city runabout 4,000 £7,500 £24,000 £32,550 £37,360 Priya Owner-occupier, driveway, average use 7,000 £7,500 £24,000 £32,550 £37,360 Rafiq Owner-occupier, driveway, high-mileage commuter 12,000 £7,500 £24,000 £32,550 £39,360 Renting versus owning a home, and having a driveway or not, do not change any figure here: insurance is held equal by assumption, and the finance and depreciation costs attach to the car, not the parking space. Mileage only moves the PCP column, through the excess-mileage charge.
- What's deliberately left out
Fuel costs are excluded because they depend on the specific models being compared (covered separately in StreetOwl's petrol/diesel/EV pieces), not on age alone. Insurance is explicitly held equal, as stated in the brief. Vehicle tax is not included in the totals above because it depends on the exact car, but as a reference point: cars first registered after April 2017 move to the standard flat rate, set at £200 a year from April 2026, regardless of whether the car is new or old; a new petrol or diesel car's first-year rate is set separately, based on its CO2 figure, and can be considerably higher than the standard rate in its first year only.
Sources
- Average car mileage is around 7,000 miles a year — DfT, National Travel Survey statistics
- Representative personal loan interest rate data — Bank of England, statistics on interest rates
- Bank Rate currently 3.75% — Bank of England, the Bank Rate
- PCP representative APR and deal structure, including mileage allowances and excess mileage charges — Which?, car finance explained
- PCP agreements set annual mileage allowances with excess-mileage charges of a few pence up to around 30p a mile — MoneyHelper, car finance options
- Many new cars retain around 40–50% of their value after five years — Which?, new and used cars
- Repair costs and faults become more common as cars age and cover more miles — Which?, car reliability survey
- Vehicle tax standard rate for cars first registered after April 2017 — gov.uk, rates of vehicle tax