What are Trucking Costs Per Mile?
Trucking costs per mile (CPM) refer to the expenses of operating a truck for each mile it travels. It offers carriers a clear picture of their expenses per mile. The CPM can be influenced by a variety of factors, such as fuel costs, insurance, maintenance upkeep, and operational expenses.
Fuel Costs
Fuel prices fluctuate daily, weekly, and monthly. One day’s price may not be the same as the next. As of August 12th, the national spot rates were holding steady. Spot rates, which are one-time fees for single shipments, for semi-trucks were $2.93. Flatbed trucks were $3.57, down from $3.64 in July, and reefers were $3.34. Fuel prices have risen 41.7% since this time last year, as diesel is now priced at $5.36 nationally.
As fuel prices rise, carriers need to adjust their pricing. They can either absorb the added cost or raise their prices, and it’s generally on a case-by-case basis. Fuel is the second-highest per-mile cost, making it imperative for carriers to pay attention when prices rise.
The price of fuel per mile is determined by:
– the cost of diesel fuel
– the total miles per gallon the truck drives
– the total amount of miles driven
For example, the fuel cost per mile for a truck averaging 6 miles per gallon and paying $5.00 per gallon of diesel fuel is $0.83 per mile.
Insurance
Insurance is crucial in the trucking industry. You can’t operate without it, as your operations will be shut down, you risk fines and impoundment, and criminal charges can be filed. There are several types of coverage you can explore, such as:
– Primary Auto Liability: Federal Motor Carrier Safety Administration (FMCSA) mandatory
– Motor Truck Cargo: required by brokers and shippers
– Physical Damage: required on financed equipment by lenders
– General Liability: required by many shipper contracts
Insurance is determined by the operator type as well. Depending on how old the carrier is, you’ll receive a rate based on new authority (0-12 months), growing authority (1-2 years), and established authority (3+ years). Rates are at their highest in the first year, then steadily fall as the business ages.
Most carriers pay an average of roughly $1,517 per month. Let’s say a regional trucking company has one driver doing 7,500 miles per month. Once you’ve divided the numbers, you end up with $0.20 per mile.
Maintenance
Carriers must make sure their fleet is in proper working order. If a truck isn’t running smoothly or is experiencing troubles, it needs to be checked. Common issues with the brakes, air lines/hoses, or wiring could cost up to $15,000 yearly. Placing that cost in your CPM helps alleviate any expense stress.
Make sure you’re doing the correct math to find your yearly maintenance fees. Include oil changes, brake and electrical repairs, inspection fees, and emergency roadside calls among other items. Do not include fuel, insurance, or other operational expenses; those go into their own category.
To find the per-mile cost, simply divide the total cost of your yearly maintenance fees by the number of miles your trucks have driven. The cost generally averages between $0.15 and $0.25 per mile, but if a fleet is poorly maintained, it could reach $0.35 or higher. The cost also depends on the age of your trucks. Trucks under 3 years of age average $0.12-$0.16 per mile, while trucks over 8 years of age may be as high as $0.25-$0.40 per mile.
Operational Expenses
There are two types of operational expenses: fixed and variable. Fixed costs are expenses that recur, either monthly or yearly. They include truck payments, loan payments, insurance costs, permits, and licenses. These are known costs that carriers know won’t change without warning, so they can accurately price their cost per mile.
On the other hand, variable costs are expenses that don’t have a set rate. They include fuel costs, maintenance, food, and tolls. These costs can rise or fall at any time, making it hard to accurately price out CPMs. However, there are a few steps that can be taken to keep variable costs low. Fuel costs can be cut by planning a more optimized route or by reducing idling. Maintenance costs are lowered when better parts and preventive maintenance are utilized. Rather than buying food on the road, prepare your own food or plan dining locations along the route to save money.
Driver wages can be placed in either fixed or variable costs. If your drivers have a flat salary, categorize them into fixed costs. If they have a per-mile pay structure, put them as a variable cost. Having a sense of the entire cost of your operational expenses makes it easier to form an accurate CPM rate.
How Do You Calculate Trucking Cost Per Mile?
You can find the cost per mile by dividing your total expenses by the total number of miles driven. Add your expenses, including fuel costs, drivers’ wages, insurance, permits, repairs, and any other fixed and variable costs. Next, calculate the total miles driven per truck.
Here’s an example of how to find the total CPM for a single regional truck driver:
– Suppose the total fixed costs average $3,000. The total variable costs average $9,000
– The total amount of miles driven per month comes out to 8,500.
– The fixed and variable costs added together are $12,000
– The driver’s pay comes out to $4,500 per month. Adding that to the previous amount brings the total cost up to $16,500
– $16,500 / 8,500 = $1.94 CPM
While your total number is important, make sure to check the costs of each section. If your total number seems higher than normal, you can do the math per mile on fuel, insurance, and others to see which one is taking the most money unnecessarily. By regularly checking individual and total CPMs, you can easily make switches to your business to save money.
Can Trucking Costs Per Mile Be Lowered?
CPMs can be lowered. You aren’t finding a way around it; you’re working smarter to optimize your costs for your shippers and your business. A few tips to help you save include:
– Maintain optimal speeds when traveling. By improving miles per gallon, you can cut fuel costs per mile.
– Optimize routes. A transportation management system (TMS) can be utilized to book backhauls, reducing deadhead miles.
– Maintain regular maintenance. Be proactive and take care of any mechanical issues before they get expensive. Taking care of your fleet ensures that they run longer.
– Monitor your spending and adjust. Always track your expenses to see which areas can be reduced. If needed, find better rates, such as finding parts in bulk or different insurance.
CPMs are necessary to keep your business running. It’s one of the most essential metrics in the trucking industry, and it’s best to understand how to set your CPM before you run the risk of losing money. As prices fluctuate, make sure to stay informed.
