Worked example
A newer car might save £1,000 a year in fuel, tax and maintenance, but if it loses substantially more value over three years, keeping the existing car can still be cheaper overall.
Frequently asked questions
What should I include in annual running costs?
Fuel or charging, insurance, tax, servicing, MOT, tyres, repairs and any other recurring costs that differ between the cars.
Why use today's value for my current car?
Keeping a car has an economic cost because the asset you own today can still depreciate. Ignoring that value can make “keep” look artificially cheap.
Should finance interest be included?
Yes, if it is material. Add expected finance interest to the replacement's annual running cost or one-off switching costs.