Whole Life Cost Index

What is the Whole Life Cost Index?

Next Green Car's unique Whole Life Cost Index expresses a vehicle's total cost of ownership for a private (non-business driver) in terms of pence per mile.

The Whole Life Cost Index assesses a vehicle's cost over three years based on an average annual mileage of 10,000 miles.

The Index includes: vehicle purchase cost, depreciation, fuel costs, vehicle tax, servicing, maintenance and repair costs. Depending as it does on the driver's demographics, location, experience and history, insurance is not included in the assessment.

The Whole Life Cost Index is calculated for all new cars in the Next Green Car database.

How to use the Whole Life Cost Index

The Whole Life Cost Index allows a realistic cost comparison between different models, vehicle and fuel types – for example, while diesel and hybrid vehicles are more expensive to buy than petrol models, their better fuel economy reduces fuel costs per mile.

The Whole Life Cost Index is expressed simply in pence per mile. Based on the assumptions (detailed in the next section), all models can therefore be compared on an equal basis, irrespective of their drive train or fuel type.

For example, electric and plug-in hybrid models can be compared with conventional vehicles using the Whole Life Cost Index. While electric vehicles have higher purchase prices, energy costs are greatly reduced as compared to petrol and diesel vehicles.

In addition to an average Whole Life Cost Index, a second index is provided for conventional models which includes the London Congestion Charge. This allows comparisons between vehicles that must pay the Charge and those eligible for the Ultra Low Emission Discount.

How is the Whole Life Cost Index calculated?

The Whole Life Cost Index is in part based on an assessment of industry leasing costs for all new UK models using contract hire lease costs for leases over three years and 30,000 miles. This figure represents the costs associated with: vehicle purchase, depreciation, vehicle tax, servicing, maintenance and repair. All lease prices are assumed to include a profit margin of 20%.

The second element of the Index is provided by an estimate of fuel costs over a three year period which is based on a vehicle's fuel economy and the latest UK market fuel price data (updated at least weekly). A 'real world' correction factor is assumed to account for the increasing divergence of official (combined) test values and real world figures (as reported in several EU Member States). A discount rate (which represents the future value of costs) of 20% is assumed for private motorists.

A third element of the Index is also calculated for conventional vehicles to account for payment of the London Congestion Charge, paid by a significant number of drivers in the South East of England. This element equals the total cost of the Charge paid on all weekdays over a three year period. As with fuel costs, a discount rate of 20% is assumed.

The Whole Life Cost as a whole is calculated by summing the lease, fuel cost and Congestion Charge elements, and the Whole Life Cost Index is calculated by dividing the Whole Life Cost by the total mileage over three years (taken as 30,000 miles; close the UK average). To make it easy to use, the Whole Life Cost Index is expressed simply in pence per mile.

For more information about the Whole Life Cost Index, contact Next Green Car.

Chris Lilly

Author:Chris Lilly
Date Updated:30th Mar 2020

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