Understanding how much it costs to keep your truck operating is the single most important financial calculation you can do for your trucking business. But it’s something that a lot of drivers and owner-operators don’t keep track of. Don’t be one of them!
Knowing your cost per mile reveals your spending patterns and areas where you could cut costs. It helps you set a fair transport price, so you don’t lose money on a load. Read on to learn more about how to calculate your cost per mile.
How to calculate your average cost per mile
Calculate your cost per mile with this formula:
Total expenses/Total miles = Total cost per mile
To figure this out, you’ll need information from previous trips:
- Expense receipts from food, fuel, lodging, and other expenses from the previous month
- List of monthly payments, such as truck fees, permits, and insurance
- An odometer reading from the first day and final day of the previous month
Step #1: Calculate how many miles you expect to drive.
Odometer information helps you figure out how many miles you drive in a given month, whether paid or unpaid. Use this formula:
End-of-the-month odometer reading – Beginning-of-the-month odometer reading = Total miles
For example, if your mileage at the beginning of the month was 67,426, and at the end of the month it was 75,968, here’s what you would calculate:
75,968 – 67,426 = 8,542 miles
Now it’s time to figure out your total expenses.
Step #2: Calculate your fixed costs.
Your expenses break down into fixed costs, variable expenses, and salary costs.
Fixed costs, or fixed expenses, are what you pay each month, whether you drive 10 miles, 1,500 miles, or not at all. They include:
- Truck payments
- License plates
You usually pay fixed costs monthly, quarterly, or yearly. But to calculate your cost per mile, you need to know the monthly cost. If, for example, your annual license plate fee is $1,800, divide that amount by 12 months. This totals $150 per month.
Your fixed costs might look something like this:
Truck payment $1,500
Insurance – Collision $500
Insurance – Health $400
License plate $150
Parking Expenses $250
Step #3: Calculate your variable costs.
Variable costs or expenses are based on how often and how far you drive. These include:
- Fuel costs
- Broker fees
- Repairs and maintenance
While some variable costs go up the more you run your truck, others can go down the longer you’re on the road.
Here are some variable costs you might have:
Broker fees $1,000
Step #4: Determine your salary expenses.
Whether you run a fleet of trucks or operate solo, you pay or draw a salary plus related expenses. Salary expenses can include wages, payroll fees, benefits, and employment taxes. If you pay yourself $4,500 a month, this is your salary expense.
Step #5: Calculate your cost per mile,
Using the above example numbers, let’s figure out your cost per mile. First, calculate your total expenses by adding fixed costs, variable costs, and salary costs together:
$,2875 + $4,950 + $4,500 = $12,325
Next, divide the total expenses by your total number of miles, which were 8,542.
$12,325 / 8,542 = $1.44
Your cost per mile is $1.44.
Find high-paying loads and increase profitability.
Does this cost per mile seem a little high? One way to reduce costs and increase your revenue is to book additional loads. In general, the more you loads you haul, the more your cost per mile decreases.
Use the Truckstop.com Load Board to find quality, high-paying loads of all different kinds. Booking jobs through our load board could boost your margins per mile while reducing your overall costs.
Want to know more? Visit Truckstop.com for more information and schedule a free demo.