Know Your Numbers – Mastering Trucking Costs Per Mile
As an Owner Operator or the head of a transportation operation knowing your numbers is the most important thing you must know well. Mastering Trucking Costs Per Mile will not only help you better understand your business, but it will also help you grow your business.
Calculating cost per mile is not as difficult as it may seem and by repeating the process over-and-over again you will become a Master of Knowing Your Numbers. As in any business there are two factors that you must know…Fixed Costs and Variable Costs.
Fixed Costs are expenses that incur every month or year no matter if the truck is moving or sitting waiting for a load.
Such costs could include:
- Truck Payment
- Trailer Payment
- Cargo Insurance
- Truck/Trailer Insurance
- Health Insurance
- Licenses
- Permits
- Accounting
Knowing these costs will help you figure annual, monthly, and cost per mile and make you a more profitable trucking business.
Variable Costs are expenses associated to the costs while the truck is operating.
Such costs could include:
- Driver
- Fuel
- Maintenance
- Lodging
- Meals
- Tolls
- Repairs
- Taxes
- Telephone
- Miscellaneous Expenses
Once we know the Variable Cost, we add that to the Fixed Cost, and we can figure out your Trucking Cost per mile.
Here is a simple formula to calculate Trucking Cost Per Mile
Total Expenses (Fixed + Variable) ÷ Total Miles = Cost Per Mile
This should be calculated monthly in order to really Master Trucking Cost Per Mile. To do this you take the Odometer reading from the end of the month and subtract that from the Odometer reading from the beginning of the month, which will give you the total miles per month.
Odometer Ending – Odometer Beginning = Total Miles
Let’s look at a hypothetical Logging Truck Operation and see the numbers at work!
ABC Logging is a single truck operation based out of Alabama and they are looking to Master their Numbers. They own a single truck and since they are in the logging business they don’t have to worry about cargo insurance (who insures logs) and the company they are hauling for provides the trailer at no cost to the trucker. The numbers below are based on a local radius operation that runs 50,000 miles annually.
| Fixed Costs | Annual Costs | Monthly Costs | Cost Per Mile |
|---|---|---|---|
| Truck Payment | $12,000 | $1,000 | .24 |
| Trailer Payment | 0 | 0 | 0 |
| Cargo Insurance | .0 | 0 | 0 |
| Truck Insurance | $11,000 | $916.66 | .22 |
| Health Insurance | $3,000 | $250 | .06 |
| Licenses | $1,000 | $83.33 | .02 |
| Permits | $1,000 | $83.33 | .02 |
| Accounting | $1,200 | $100 | .024 |
| Total Fixed Costs | $29,200 | $2,433.32 | .584 |
| Variable Costs | Annual Costs | Monthly Costs | Cost Per Mile |
| Driver | $30,000 | $2,500 | .6 |
| Maintenance | $3,000 | $250 | .06 |
| Fuel | $15,000 | $1,250 | .3 |
| Lodging | $2,000 | $166.66 | .04 |
| Meals | $6,000 | $500 | .12 |
| Tolls | $1,000 | $83.33 | .02 |
| Repairs | $5,000 | $413.66 | .1 |
| Taxes | $2,000 | $166.66 | .04 |
| Telephone | $900 | $75 | .002 |
| Miscellaneous | $1,000 | $83.33 | .02 |
| Total Variable Cost | $65,900 | $5,488.64 | 1.30 |
| Total Cost of Operation | $95,100 | $7,921.96 | $1.88 per miles |
(per mile cost is calculated by dividing annual cost by mileage of 50,000)
Now that you’ve Mastered – Trucking Costs Per Mile you will need to keep evaluating the costs per month. The two biggest factors effecting Trucking Costs Per Mile is fuel and trucking insurance costs. Fuel costs need to be monitored monthly and insurance costs need to be evaluated yearly.
Trucking Insurance can be costly, but there are some basic things you can do to keep your costs low.
- Good Credit – Yes, your credit score does affect your insurance rate. Keeping a high credit score will lower your price.
- No Losses – The more claims you have the higher the price. Keeping your claims as close to zero as possible will open the doors to you finding lower insurance prices.
- Good Inspections – Every time you run through an inspection point the insurance companies know what was out-of-service on the rig. Keep you truck in top running condition.
- Drivers – As professional drivers, the insurance companies want you to keep a clean driving record. Violations will drive up the costs of insurance.
- Safersys.org – Keep your cargo hauled to a minimum. More cargo marked will also drive up insurance costs. Be sure to watch our YouTube Video on how your DOT filings affect your insurance rates.