8 Biggest (and Necessary) Owner-Operator Expenses

Owner-operators can make good money, averaging more than $221,000 per year. But that’s calculated before the essential owner-operator expenses that are a necessary part of running a successful business. Truck driver expenses fall into several different categories, and managing them is vital to your success. Here’s what you need to know to accurately calculate your owner-operator income and expenses.

The importance of reducing owner-operator expenses

Although owner-operator trucking company expenses may be an important part of running your business, that doesn’t mean you shouldn’t try to cut them down. The average owner-operator runs a profit margin of approximately 5%, which means that only about $1 of every $20 in gross income actually counts as profit. So to maximize your income, you will want to reduce your expenses where possible.

8 necessary owner-operator expenses

There are many possible expenses that an owner-operator might face. Exactly which ones you have will depend on the specifics of your equipment, the loads you carry, the runs you choose, and even your personal habits. Here, we’ll cover the expenses that are typically the most necessary for running a profitable business.

1. Truck purchase/lease

Your truck payment may be the largest of your fixed owner-operator monthly expenses. If you own your truck outright, you can ignore this category. But if you’re making payments, there’s typically very little you can do to lower them.

2. Truck maintenance and repair

Truck maintenance and repair is also a very big expense for many owner-operators. It may be tempting to skip some maintenance to lower your bills, but this would be a major mistake. You’re required by law to maintain your truck in safe operating condition, and putting off needed maintenance only ensures a massive repair bill down the line. Instead, budget for these costs so you won’t be caught by surprise. In general, you can expect truck maintenance and repair to total approximately 10% of your overall expenses, including $1,000 to $4,000 for tires each year.

3. Fuel expenses and tolls

Fuel is another major owner-operator expense, with the average cost between $50,000 and $70,000 each year. You can estimate your cost per mile by dividing your truck’s miles per gallon (MPG) by the current cost per gallon for fuel and then multiplying by the number of miles you plan to drive.

Although you may not be able to significantly reduce your fuel expenses, you can shave off a fraction by finding your engine’s “sweet spot.” This is the RPM at which your engine runs most efficiently. Ride the sweet spot as much as you safely and practically can, and you can lower your fuel spend.

If you’re concerned about paying for fuel, Truckstop lets you choose to be paid to your EFS or Fleet One fuel card. With Pay, you can submit your request anytime and receive fuel card payment within one hour in exchange for a small fee.

Tolls are a fact of life if you want to get somewhere in a hurry. You can cut your toll expenses by taking alternate routes when possible, but be sure to calculate mileage and time for both routes and compare them. Many times, you’ll find that paying the tolls is the better option.

4. Annual licensing, permits, and documentation

Don’t forget to account for your annual licensing and permitting fees. These are set by law and may vary by state. Check with the relevant government authority for current pricing.

• Business licenses
• Renewal fees
• Transport permits
• Vehicle inspections
• Registration fees

5. Insurance expenses

Insurance is a category in which you’ll need to carefully weigh costs versus benefits. The more coverage you have, the higher your monthly premiums will be. But the less coverage you have, the more risk you are assuming. There are two basic types of insurance for owner-operators to consider: vehicle insurance and health insurance.

Vehicle insurance

Commercial truck insurance can be complex. You’ll need to carry mandatory minimums, but there are numerous options available that increase your protection. Take the time to understand the various types of coverage and make an informed decision as to what you need. Also, make sure you understand what’s not covered. For example, some policies don’t cover weather events and other “acts of God.” 

Health insurance

Unless you have a spouse whose job provides you with health insurance, you will need to get your own. Visit Healthcare.gov for information about applying for individual health insurance through your state or national insurance exchange.

6. Taxes

Taxes are another category of owner-operator expenses that you will need to consider. You can bring down your corporate taxes by taking all the deductions for which you qualify, but be careful. You need to be able to prove most expenses, such as by keeping your receipts, and not everything is fully deductible. It’s best to consult with a tax attorney or CPA each year, along with keeping detailed records. Remember that taxes fall into multiple categories:

• Personal
• Corporate
• Road use
• Fuel

7. Food and drink expenses

When you’re on the road, you have to eat. It may be tempting to pull into a truck stop for every meal, but the cost can add up quickly. Carriers can deduct a portion of your meals on the road from your taxes under a deduction known as per diem, but you’ll still want to keep your food budget reasonably low. Consider investing in a small refrigerator and a microwave for your truck rather than exclusively dining out.

8. Professional services

Professional services can be loosely defined as the services you pay for to make your business run more smoothly. Owner-operators rely on many different types of professional services. Here are a few of the most common.

Broker fees

Freight brokers match truckers with shippers, potentially providing you with a steady stream of loads to haul. This can be an excellent option, but it isn’t free. Every broker sets its own rates, but in general, you can expect to pay 10% to 20% of the gross margin on each load.

Load board subscription

Load boards are vital to many owner-operators, as they allow you to quickly find and book some of the highest paying loads in the industry. Rather than paying per load, you’ll pay a monthly subscription fee for access to the load board. Truckstop offers a carrier load board to keep you on the road and in the money.

Factoring expenses

Factoring is a service that helps control your cash flow. Without factoring, you haul a load, submit an invoice, and then wait to get paid. While the industry average is 40 days, it’s not unusual to wait as long as 90 days to get paid. Factoring allows you to essentially sell your invoice to the factoring service. They pay you right away and then collect the money when the invoice is paid.

Naturally, there is a fee for this service, which typically ranges from 2.5% to 5% per invoice, depending on business volume. But it can be well worth paying the fee to ensure that you get paid quickly.

Note that there are two types of factoring: recourse and non-recourse. With recourse factoring, the factoring service will make a reasonable attempt to collect on the invoice. But if it isn’t paid, you’re on the hook to pay back the factoring service and attempt to collect the debt yourself. Recourse factoring is typically less expensive since the factoring service is assuming less risk.

Non-recourse factoring costs more, but it protects you from non-paying clients. Some factoring services only protect you if the client goes bankrupt, while others will cover the cost of virtually all non-payments. Non-recourse factoring costs more than recourse factoring, but you will assume less risk.

Truckstop offers non-recourse factoring that will cover you against all non-payments from approved brokers, as long as you aren’t at fault. You’ll pay a flat rate per invoice and get paid faster.

Transportation management system (TMS) subscription

A transportation management system, such as the Truckstop ITS Dispatch, dramatically reduces the amount of paperwork you need to manually fill out. For a small monthly fee, you’ll be able to automate most of your processing, from single-click invoices to detailed customer agreements to International Fuel Tax Agreement (IFTA) reporting. You’ll also be able to bring up detailed reports to help you make smarter business decisions.

Expedited payment fees

Although expedited payment fees are small, it’s important to account for them in your budget. Rather than waiting for a check, the bottom line is that you pay a small percentage of the invoice and receive your money right away.

Truckstop Pay lets you choose how you get your money from any broker who also uses Pay. For a fee of just 2.99%, you can get paid within 24hrs through ACH bank account payment, fuel card payment, or wire transfer. Note that this is different from factoring, as you will receive your money when the broker pays the invoice.

Find high-paying loads and get paid faster.

Are you ready to find high-paying loads and get paid faster? At Truckstop, we make it simple with the Truckstop Load Board for Carriers. We offer everything you need to find and book high-paying loads, minimize your expenses, and get paid as soon as possible.