How to Calculate Cost Per Mile for Your Fleet (UK, 2026)

Key Takeaways

• Cost per mile (CPM) is total annual vehicle cost divided by total annual miles. Both numbers must be real, not rounded estimates, or the answer is fiction.
• For a typical 3-year-old Ford Transit Custom on diesel doing 22,000 business miles a year in the UK in 2026, fully-loaded CPM works out at roughly 55 to 60p per mile, including finance.
• That sits well above HMRC's blended AMAP rate of about 34p per mile (45p for the first 10,000 business miles, 25p after). The 20p-plus gap is what fleets absorb when they price jobs from the AMAP rate instead of their real CPM.
• Split your CPM into fixed costs (incurred whether the van moves or not: finance, insurance, VED) and variable costs (incurred per mile: fuel, tyres, wear-related servicing, AdBlue). The split changes how you should price short jobs versus long ones.
• Recalculate at least every six months and any time fuel, finance, or insurance moves more than 10 percent. CPM ages fast.

If you want one number that tells you whether a van is making you money, it is cost per mile. Every other fleet metric (fuel cost, monthly lease, annual insurance) only makes sense when you divide it by the miles it bought. A Ford Transit Custom that costs you £12,000 a year is cheap if it covers 30,000 miles and expensive if it covers 8,000.

The problem is that most UK fleets do not actually know their van cost per mile. They know a few of the costs (the ones that arrive as monthly direct debits) and they know roughly how far the van travels (because the odometer says so when they remember to look). What they do not have is a clean formula, a complete list of inputs, and a recent number to quote a job against.

This post fixes that. It gives you the cost per mile formula UK fleet operators should be using, walks through a worked example for a 3-year-old Transit Custom on current 2026 figures, and shows you how to turn the answer into pricing you can defend in a tender or in front of an accountant.

What cost per mile is, and why most fleets get it wrong

Cost per mile is the total annual cost of running a vehicle divided by the total annual miles it covers. The formula is one line. The reason most fleets get it wrong is that they leave costs out: depreciation, parking, ULEZ, admin, and the time the van spent sitting in the workshop instead of earning. A real CPM includes everything that touches the vehicle, and it uses your actual miles, not an estimate.

The number matters because every job you price, every contract you tender for, and every decision about whether to buy or lease the next van depends on it. If your real CPM is 55p and you price work at 35p assuming the AMAP rate covers it, you are working at a loss on every mile you cover. You will only notice when the year-end accounts come in and the profit is not there.

The cost per mile formula (step by step)

The formula is: total annual vehicle cost divided by total annual miles, equals cost per mile. Total annual vehicle cost is the sum of every category that touches the van across a year (finance, fuel, insurance, VED, MOT, servicing, repairs, tyres, parking, clean air zone charges, telematics, and admin). Total annual miles is the odometer reading at year end minus the reading at year start.

Step by step:

1. Pick a reference period. Annual is the easiest to work with because most insurance, VED, and servicing costs land annually. You can do quarterly if you need a sharper signal on a hard-working van.
2. Add up every cost in the period. Use the 14 vehicle expense categories as a checklist so you do not leave anything out. Categories with irregular bills (tyres, repairs) get apportioned across the year.
3. Record the actual miles covered. Odometer at year end minus odometer at year start. Not "I think we did about 20,000".
4. Divide. Total cost ÷ total miles = CPM, expressed in pence per mile.

That is the whole formula. The work is not in the maths; it is in being honest about the inputs.

A worked example: a 3-year-old Transit Custom on UK roads in 2026

For a 3-year-old Ford Transit Custom on a contract hire deal, doing 22,000 business miles a year in mixed UK use with current 2026 figures, the fully-loaded cost per mile works out at around 56p per mile (about £12,400 a year). The single biggest line is fuel at roughly £5,000 a year, driven by a real-world 38mpg figure and diesel sitting at about 192p per litre.

Here is the breakdown:

• Finance (contract hire). £350 per month, so £4,200 a year.
• Fuel. 22,000 miles ÷ 38mpg = 579 UK gallons. 579 gallons × 4.546 litres = 2,632 litres. 2,632 × £1.92 = £5,053.
• Insurance. £1,200 a year for business use on a Transit Custom (the UK average for a Transit Custom on a comprehensive policy is around £1,000, with business haulage running higher).
• VED. £345 a year flat for a post-2001 light goods vehicle in tax class 39.
• MOT. £54.85 (the Class 4 cap), once a year on a 3-year-old van.
• Servicing. £250 a year (annual service on the standard Ford 18,000-mile / 12-month interval, see van service intervals by manufacturer).
• Tyres. A set of four at £600 every 30,000 miles, so £440 across 22,000 miles.
• Repairs and breakdown. £500 budget for unscheduled work on a 3-year-old van.
• Parking, tolls, and clean air zones. £400 a year (one Dart Charge crossing a week and an occasional ULEZ day at £12.50).
• Telematics, admin, and software. £360 a year.

Total: £12,402 per year. Divide by 22,000 miles: 56.4p per mile.

Strip out finance and you get £8,200, or about 37p per mile in cash running costs alone. That gap (the 19p between cash CPM and fully-loaded CPM) is the cost of having the van available to take the job in the first place.

Fixed versus variable: the split that changes how you use the number

Split your CPM into fixed costs (incurred whether the van moves or not) and variable costs (incurred only per mile driven). Fixed costs include finance, insurance, VED, MOT, and the standing share of telematics and admin. Variable costs include fuel, AdBlue, tyres, wear-related servicing, and repairs. The split matters because short jobs and long jobs have very different real costs.

For the worked example above:

• Fixed costs. Finance £4,200 + insurance £1,200 + VED £345 + MOT £55 + telematics/admin £360 = £6,160. That is £16.88 a day, every day, before the van turns a wheel.
• Variable costs. Fuel £5,053 + tyres £440 + repairs £500 + parking £400 = £6,393. Across 22,000 miles, that is 29p per mile of true driving cost.

Now the pricing logic: a 50-mile day has only £14.50 of variable cost on top of the £16.88 fixed daily cost. A 200-mile day has £58 of variable cost on top of the same £16.88. If you quote both jobs at "60p per mile", the short job is wildly underpriced and the long one is roughly right.

The fix is to quote with a day rate that covers the fixed daily cost, plus a per-mile variable rate. That model recovers your real costs on both shapes of job.

What real cost per mile looks like compared to HMRC's 45p AMAP rate

HMRC's Approved Mileage Allowance Payment (AMAP) is 45p per mile for the first 10,000 business miles in a tax year and 25p per mile thereafter. For 22,000 miles, the blended AMAP rate works out at about 34p per mile. That is roughly 22p per mile lower than the real CPM in the worked example above. AMAP is a tax-relief threshold, not a true cost of operating a van.

The gap matters in two situations:

If you are a sole trader using AMAP to claim mileage. AMAP is the simplified method. It is generous for a low-cost car doing high mileage and ungenerous for a working van. If your real CPM is well above AMAP, the actual-cost method (claiming your real expenses) usually leaves more money in your pocket. Run both calculations once a year and pick the higher one.

If you are a fleet quoting client work at "the HMRC rate". Some operators price tender mileage at AMAP (45p) on the basis that "if the taxman accepts it, it must be the cost". It is not. AMAP is a flat rate set in 2011 and unchanged since. Real CPM in 2026, with diesel at 192p and insurance up significantly, is well above it.

Cost per mile for an electric van versus a diesel van

For a comparable electric van charged mostly at home or depot, the variable cost falls by roughly 60 to 70 percent (because a kWh delivers more miles per pound than a litre of diesel), but the fixed cost rises (finance is higher on an EV, insurance is higher, and EV tyres wear faster). Net CPM for an EV van in UK use sits around 5 to 10p per mile lower than diesel for fleets that can charge cheaply, and roughly the same or higher for fleets relying on public rapid charging.

Worked comparison for the same 22,000-mile / 3-year-old van profile:

• Diesel Transit Custom. Fuel ~23p / mile + tyres 2p + finance/insurance/admin/repairs etc. = ~56p total.
• Electric e-Transit Custom on home charging. Energy at 7p / kWh × 3.5 miles per kWh = 2p / mile fuel + tyres ~3p (faster wear from instant torque and higher kerb weight) + finance £450 / month + insurance £1,400 + £0 VED until April 2025 (now £345 a year) = ~52p total.
• Same e-Transit on public rapid charging at 70p / kWh. Energy ~20p / mile = ~70p CPM.

The headline lesson: EV economics live or die on charging strategy. Track the kWh as carefully as you would track diesel litres.

When to recalculate (and what triggers a re-do)

Recalculate CPM at least every six months for an active fleet, and immediately after any of: a 10 percent move in fuel prices, a renewal cycle on insurance or finance, a change in mileage band that pushes you past 10,000 miles in the tax year (which changes the AMAP comparison), a vehicle moving from warranty to out-of-warranty, or a clean air zone expansion that adds new daily charges to your routes.

For a typical UK trade fleet, two scheduled recalculations a year (one at the financial year-end, one at the calendar half-year) plus one ad-hoc recalculation when fuel jumps is enough. Setting a calendar reminder is what stops the number drifting out of date.

Using cost per mile to price jobs and quote tenders

Once you have a fixed daily cost and a variable per-mile cost, every quote becomes a calculation, not a guess. The model is: day rate that covers fixed daily cost plus your labour and margin, plus a mileage rate that recovers the variable per-mile cost plus your margin on miles. You stop subsidising short jobs from long ones, and you stop pricing yourself out of long ones because the headline-per-mile number looks scary.

Worked example using the Transit Custom figures:

• Fixed daily cost: £16.88 (the van existing).
• Variable per-mile cost: 29p (the van moving).
• Labour: your usual day rate (say £200 for an 8-hour day on the tools).
• Margin: whatever your business needs.

A 50-mile job, 1 day on site:

• Van cost: £16.88 fixed + (50 × £0.29) £14.50 variable = £31.38
• Labour: £200
• Margin (say 25%): £58
• Quote: £289

A 200-mile job, 1 day on site:

• Van cost: £16.88 fixed + (200 × £0.29) £58 variable = £74.88
• Labour: £200
• Margin (25%): £69
• Quote: £344

The flat per-mile model would price both jobs at "(miles + a fudge factor) × 60p", which under-recovers on the short one and over-charges on the long one. Splitting fixed and variable fixes both.

Five mistakes that make most fleet CPM numbers wrong

The five recurring errors that make published fleet CPM numbers fiction:

1. Forgetting depreciation. Owned vans lose value every year. If you bought a £25,000 Transit Custom outright and it is worth £14,000 three years later, that £11,000 / 36,000-mile loss adds 30p per mile that nobody is putting on the spreadsheet. Either include capital allowances at HMRC's published rate or apportion the actual loss across the miles.
2. Estimating mileage instead of measuring it. "About 20,000 miles a year" usually means 22,000 to 26,000 in reality. The difference between 20k and 25k miles changes your CPM by 20 percent. Use the odometer reading, or automatic mileage tracking.
3. Missing the irregular categories. Tyres, repairs, parking, ULEZ, admin time. Each one is small. Together they add 5 to 10p per mile that goes uncounted.
4. Using the dealer's official mpg, not the real-world figure. Official WLTP figures for a Transit Custom are around 40mpg. Real-world working figures are 35 to 38mpg. The fuel line is the largest variable cost; getting the mpg wrong is where most CPM calculations drift.
5. Comparing CPM to AMAP and assuming they should match. They should not. AMAP is a tax allowance, not a cost benchmark. Your CPM should track what your van actually costs you, on your actual routes, in your actual year.

The bottom line

Cost per mile is the only fleet number that tells you whether a job, a route, or a vehicle is paying for itself. The formula is total annual vehicle cost divided by total annual miles, and both inputs need to be real. For a working diesel van in the UK in 2026, expect a fully-loaded CPM in the 50 to 60p range, well above HMRC's blended AMAP rate.

Run the calculation now using your actual figures from the last 12 months. Split the answer into a fixed daily cost and a variable per-mile cost. Use that pair, not a single per-mile number, to price every quote from this point forward. Then put the recalculation in your diary for six months from today.

Stop quoting jobs from a guess. Autodue tracks every vehicle expense by category and pulls live mileage from each van, so your cost per mile updates itself as the year goes on. First van free.

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Sources: GOV.UK: Approved Mileage Allowance Payments (AMAP) · GOV.UK: V149 Rates of vehicle tax · GOV.UK: MOT test fees · RAC Fuel Watch: Latest UK petrol and diesel prices · Fleet News: Van running costs benchmarks · NimbleFins: Average cost of UK van insurance