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Cost-Per-Mile Calculation
The Cost-Per-Mile Calculation plays an important role in the success of your trucking operation, because it will tell you the operating expenses of your truck per mile driven.
You can use a simple form or a computer program to calculate your cost per mile. You can even calculate the cost per mile without these helpful aids because it is quite simple but very important!
You find more information in our book “The Successful Truck Owner Operator”
You need to know two factors: (1) your operating expenses for a specific time period (a month, a calendar quarter, or a year) and (2) the miles driven in the corresponding time period.
For example if your quarterly operating expenses amount to $25,205 and you have driven 22,194 miles in that quarter, your cost per mile is $1.14.
You can obtain these numbers from your monthly or quarterly financial statements. Why is it important to know your cost-per-mile factor? Because it allows you to quickly determine the profitability of a load.
For example, your broker offers you a load that pays $1,000 for 850 miles, but you have to deadhead (drive empty) 350 miles in order to get to the loading location. Let us assume your cost-per-mile factor is 69 cents, it will cost you $241.50 out of your own pocket just to drive your truck to the pick-up location, and it will cost you another $586.50 (850 miles times 69 cents) to deliver the load, should you decide to do so. This leaves you with $172 for driving 1,200 miles.
This example clearly demonstrates the importance of the cost-per-mile calculation for the success of your trucking operation.
As a general rule, never allow your deadhead costs to exceed 10 percent of the freight rate offered, unless you receive compensation for deadheading or circumstances simply will not allow otherwise.
Now that you have identified the operating cost, you start to think about ways to lower your cost and increase your profit margin. Keep in mind, if you have operated your truck only for a short time, the cost-per-mile factor may be misleading, because you do not yet have comparable historical data from previous years.
However, as a responsible business manager you should compare your cost-per-mile factor from month to month to determine :how your business progresses.
Steps you can take to reduce operating expenses include:
slow down and drive 60 miles per hour; use high quality, synthetic motor oil, and practice preventive maintenance. You can realize savings of thousand dollars a year just by driving your truck at 60 mph. Engine manufacturers such as Caterpillar say slowing down will (1) reduce fuel consumption, (2) reduce tire wear by as much as one fifth, and (3) extends the truck engine’s lifecycle, thus delaying the need for an engine overhaul.
Study the following examples to see the dramatic difference: Assuming you drive 125,000 miles at 70 mph with a fuel efficiency of 5.5 miles per gallon, your truck consumes 22,727 gallons of fuel. Assuming you drive 125,000 miles a year at 60 mph with a fuel efficiency of 7 miles per gallon, your truck consumes 17,857 gallons of fuel. Slowing down will save 4,870 gallons of fuel, or $21,915 at $4.50 per gallon of fuel.
The Operations Maintenance Manual for a Caterpillar 3406 truck engine calls for an engine overhaul after using 100,000 gallons of fuel. Slowing down to 60 mph will extend the lifecycle of your engine 14 months, from 4 years 4 months to 5 years 6 months.
Additional steps you can take to extend the lifecycle of your truck’s engine include using DelVac No. 1 synthetic motor oil from Mobil mixed with Tufoil, using a 1 to 10 mix ratio) and replacing the oil filters with micro glass filters. When you use this high quality oil mixture, change the oil only every 25,000 to 30,000 miles. Tufoil is available through Fluoramics Inc., 18 Industrial Ave., Mahwah, NJ 07430, phone 1-800-922-0075.
