How to Calculate Trucking Operating Cost Per Mile

How to Calculate Cost-Per-Mile 

To calculate your cost per mile accurately as an owner-operator, consider the total number of miles driven, including any deadhead miles (empty miles without a load) and your MPG (miles per gallon). This process requires a bit of math and discipline, so investing in reliable accounting software like QuickBooks can help track bookkeeping and total operating expenses more efficiently.

For example, if a trucker needs $25,180 per month to cover their monthly costs, and their trucking company averages 20,000 miles each month, the cost per mile would be:

$25,180 / 20,000 = $1.259 per mile

This means that any rate below $1.259 per mile would result in a loss. As your business expands or acquires additional trucks, it’s essential to recalculate operating costs to ensure profitability remains consistent.

Operating Cost Calculation 

Calculating your operating costs involves understanding both fixed costs and variable costs.

Fixed costs are the predictable, unchanging expenses you encounter every month, such as truck payments and insurance premiums. These fixed expenses allow for straightforward planning as they remain consistent over time. Other common fixed expenses in trucking include:

• License Plates and permit fees
• Truck insurance
• ELD Monthly Service Fees
• Load Board subscriptions

Fixed Costs 

Fixed costs are the expenses that you can count on remaining the same month after month, such as your truck payment. You know how to appropriately plan for your truck payment because when you start the payments, they break them down over a set amount of time with a set payment amount each month until it is paid off.

Variable Costs 

Variable costs fluctuate based on mileage and other factors. Examples of variable expenses include fuel costs, tolls, wages, broker fees, and maintenance costs. These can vary monthly, and it’s crucial to estimate these expenses based on expected compensated miles and empty miles. Some variable costs include:

• Fuel costs (depending on miles driven and fuel efficiency)
• Maintenance costs (routine and unexpected repairs)
• Tolls (based on routes taken)
• Dispatching and broker fees

Effectively managing both fixed and variable expenses helps you stay in front of your operating costs and maintain a profitable trucking business.

Example 

To illustrate, here’s an example calculation for a 2-truck trucking company run by John Doe.

Fixed Expenses

• Truck Payment – $1,300
• Trailer Payment – $960
• Insurance Payment – $2,400
• ELD Service Fee – $50
• License & Permit Fees – $600
• Preventative Maintenance – $800
• Load Board – $70
• Drivers’ Salaries – $8,000

Variable Expenses

• Fuel – $7,000
• Unexpected Expenses – $4,000
• Tolls – Estimated based on typical routes

Total Cost: $25,180 per month

Based on this example, John needs to secure freight rates that cover at least $1.259 per mile to break even. Anything above this rate will contribute to profitability.

Key Takeaways for Cost Management 

Keeping an accurate cost-per-mile calculation is essential for managing your trucking cost effectively. By tracking both fixed costs and variable expenses, truckers can optimize their cash flow and plan for monthly costs. Here are some tips:

1. Use accounting software: Tools like QuickBooks streamline bookkeeping and provide insights into operating costs.
2. Monitor and update your calculations: Regularly update your calculations, especially when adding new expenses, trucks, or drivers.
3. Evaluate your cash flow: Keep a close eye on cash flow to ensure your business remains profitable.
4. Factor in all expenses: Include both fixed expenses (e.g., truck payments) and variable expenses (e.g., fuel, tolls).

A well-calculated cost per mile is crucial for setting a baseline to negotiate rates, manage operating expenses, and keep your trucking company profitable.