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Calculatingyour cost per mileis essential for determining whether you are charging enough for hauling a load. Knowing and understandinghow to calculate cost per milecan help ensure you do not lose money. Truck drivers can go out of business if they don’t calculate their average cost per mile, which is why taking the time to do so is crucial.
You’ll need to know how many miles you drive and your total expenses to make this calculation. Once you have your number, we can help you find ways to reduce your cost per mile and make your business more successful.
How to Calculate Trucking Cost Per Mile
Follow the steps below to determinehow to calculate delivery cost per mile.
1. Calculate How Many Miles You Will Drive
To start, you may want to create a spreadsheet for tracking the factors involved in the calculation.The first factor in theformula for cost per mile is the number of miles you drive. This number includes both your compensated miles and deadhead miles, also known as the miles for which you are not compensated. Miles driven can vary greatly by owner-operator and could even vary from month to month for the same driver.
Choose a period over which you will track the number of miles driven. If you don’t already have a tracking system in place, you can use your odometer to calculate your mileage manually. You can also use software to track your mileage.
For example, you may decide to track your miles driven over the course of a month. At the start of the month, write down the number on your odometer and do the same at the end of the month. The difference is the number of miles you drove that month.
2. Determine Your Fixed Costs
On your tracking spreadsheet, include a column for your fixed costs. The fixed costs for your trucking company are the expenses that remain constant each month, no matter how many loads you transport or miles you drive.
Divide the total of any annual costs by 12 to get your monthly cost. Add it to the total of your other fixed costs. License plates, for example, are typically paid one time a year. If your yearly cost for license plates is $900, your cost per month is $75.
Your fixed costs may also include:
- Annual permits
- Salaries
- Insurance
- Baseplates
- Truck payments
- Accountant costs
- Home parking expenses
- Cell phone payments
- Equipment loan payments
Typically, your largest fixed costs will be your truck and insurance payments.Unless business operations change, you’ll add up your fixed costs only once to calculate your cost per mile.
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3. Find Your Variable Costs
You’ll also need a column on your spreadsheet for your variable costs. These are the costs that vary each month, depending on how many loads you’ve transported and how many miles you’ve driven. The more miles you drive, the more your variable expenses increase. The fewer miles you drive, the lower your variable costs will be.Though these costs could be in a similar range from month to month, the exact cost isn’t the same.
Variable costs may include:
- Fuel
- Tolls
- Tires
- Food
- Truck repairs
- Utilities
- Lodging
- Unloading fees
- Per-mile wages
- Load board fees
- Truck maintenance
- Freight broker fees
- Dispatching services
Typically, fuel, broker fees and driver wages are the largest variable costs. Depending on how drivers are paid, wages or salaries could fall under fixed or variable costs. Flat salaries fall under fixed costs, and per-mile wages fall under variable costs. A system for tracking these expenses is essential.
4. Calculate Your Cost Per Mile
Once you know miles driven and your total fixed and variable costs, you can calculate your cost per mile. Divide your total monthly costs by your total monthly miles to get your cost per mile for that month.
You can also calculate your cost per mile separately for your fixed and variable costs. To get your fixed costs per mile, divide your fixed costs by the miles. For example, if your fixed costs for the month are $2,000 and you drove 10,000 miles, your fixed cost per mile would be $0.20.
Perform the same calculation to get your variable costs per mile. For example, if your variable costs are $3,000, your cost per mile would be $0.30. Add these numbers together to get your total cost per mile, which would be $0.50. Use a trucking cost per mile calculator to help you calculate your cost per mile.
Having this number can help you understand how much you need to earn to cover your expenses and how much you need to earn to make a profit. In the above example, every cent you earn above $0.50 becomes profit. If you charge $1.00 a mile, you’d make a profit of $0.50 per mile.
Tips to Reduce Trucking Cost Per Mile
Once you better understand your cost per mile and your individual expenses, you may be able to identify ways to reduce your variable and fixed costs, thus lowering your cost per mile.
Lower Variable Costs
Variable costs tend to be easier to reduce than fixed costs. Options that may be available to you include:
- Using a fuel card to save on fuel costs.
- Packing your meals before you hit the road.
- Identifying dining and lodging locations that can save you money.
- Reducing mileage by optimizing your routes and lowering out-of-route miles.
- Lowering your maintenance costs by investing in better quality parts and preventive maintenance.
- Improving fuel mileage by addressing driving habits and implementing more aerodynamic parts.
Lower Fixed Costs
Fixed costs can be a bit more challenging to reduce, but there may be some steps you can take, such as:
- Lowering your truck loan interest rate.
- Driving more miles so your money goes further.
- Decreasing reactive maintenance by implementing preventive maintenance practices.
- Shopping around for insurance to lower your premiums.
Contact Porter Freight Funding for Freight Factoring Services
At Porter Freight Funding, we offerfreight factoring servicesto truck fleets and owner-operators to help them grow their businesses. Our freight factoring services include same-day funding on invoices, flexible contracts, flat rate pricing and dedicated client representatives. Our services also include dispatching and fuel cards.
- Dispatching:You can find freight loads that pay the best through our freight database of more than 250 broker options.Dispatchesare for Flatbed, Hotshot, Van, Reefer and Power-Only.
- Fuel cards:With a fuel card, you can enjoy savings on every gallon you purchase at both smaller chains and major stops. Paperless fuel advances are also available.Fuel cardscan help you lower your average cost per mile for trucking.
Apply nowto get a free quote for our freight factoring at Porter Freight Funding, orcontact usfor help growing your trucking business.
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portercap_admin2024-07-12T13:30:48+00:00Cash Flow Tips, Fleets, Fuel Cards, Owner Operators, Trucking Business Success, Trucking Company, Trucking Industry News|
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