Cost per kilometre: the method, figure by figure

How do you work out your cost per kilometre?

Add your annual fixed charges to your variable charges multiplied by your yearly mileage, then divide the total by that same mileage. The result is your cost per kilometre driven. It tells you where you stop losing money — not where you start making a living.

Fixed charges do not depend on distance: insurance, vehicle lease or loan, licence, accountant, business rates, phone. You pay them whether you drive or not.

Variable charges fall per kilometre: fuel or electricity, tyres, maintenance, washing. They grow as you drive more.

Vehicle depreciation is the line most often forgotten. A vehicle loses value as it runs: leave it out and your cost is artificially low — you will find out when it needs replacing.

Do you count every kilometre, or only those with a passenger?

Both, but not in the same place. Cost is computed on every kilometre driven, approaches included. The selling price, however, is only billed on kilometres with a passenger. That gap is why your acceptance threshold sits well above your cost.

A driver covering 45,000 km a year with 40% approaches and empty returns only bills 27,000 km. The remaining 18,000 kilometres cost money and bring in nothing — and their cost is carried by the other 27,000.

What is the most common mistake in this calculation?

Forgetting social contributions, or adding them to costs. They are computed on the revenue you take in, not on what is left. You therefore have to work back to the revenue that, once contributions are paid, still covers your costs and your target pay.

The formula is an inversion, not an addition: revenue needed = (costs + target pay) ÷ (1 − contribution rate).

On a case needing €49,800 covered at a 22% rate, the naive addition gives €60,756 and the inversion €63,846. Spread over billed kilometres, that gap moves the threshold by more than 25%.