During the operation of a power transformer, a large amount of heat is generated due to the electrical and magnetic energy losses in its core and windings, causing a temperature rise in transformers. This generated heat is known as the main factor for aging the electrical insulating system of a transformer. In this research, we numerically studied the ability of a vegetable-based oil — as an alternative coolant for the petroleum-based oils — on the cooling performance of a power transformer. The studied oil was a biodiesel produced from waste cooking vegetable oils, having lower viscosity compared to traditional mineral oils. We also calculated the aging rate of the transformer in the presence of the biodiesel. The results indicated that compared to the mineral oil, the average hotspot temperature of the transformer is 3 degrees lower when the biodiesel was used. The life expectancy of the transformer with the vegetable-based oil was also significantly longer than the case with mineral oil. In conclusion, this study provided a sustainable way to use an eco-friendly material produced from a waste resource as an alternative insulating liquid for the cooling of power transformers.