Calculating the best truck freight rates can be complex. While you need to be competitive, you also need to be profitable. It’s tricky to constantly weigh supply and demand to offer a competitive rate that still makes you money.
You need to take into account your fixed costs. These are the expenses you’ll pay every month, whether you move any goods or not, such as insurance, equipment leases or payments, and permitting. You’ll also need to factor in your variable costs, such as maintenance and repairs, taxes, and driver rates. All of these things together help determine a base rate to work from.
Let’s say your base rate is $1.80 a mile, and anything above that is pure profit. Want a 20% margin? You’ll need to charge a minimum of $2.16 per mile. Knowing your base rate is crucial, but it’s just one step in the process.
What are truck freight rates?
Trucking freight rate is the price a shipper or broker will pay you — as the carrier — to haul a load. It’s simple in concept, but as you know, rates can vary significantly, even within the same lanes. Having current and accurate information about trucking freight rates is essential to pricing and negotiating rates properly.
How are trucking freight rates calculated?
Trucking rates are calculated on a per-mile basis. First, take the mileage between the starting and destination points. Then divide the overall rate by the number of miles between destinations to get your trucking freight rate.
RATE DIVIDED BY MILEAGE = PER-MILE FREIGHT RATE
Let’s say you’ve got a load that’s headed to Miami from Atlanta. Depending on your exact pickup and drop-off locations, the distance is roughly 675 miles. If the rate is $3,500, the trucking freight rate would be $3,200 / 675 = 4.74. In this case, the rate would be $4.74 per mile.
Of course, calculating the overall rate to charge will depend on a variety of factors besides just the mileage.
Available routes and loads
A big part of calculating rates is determining your fleet and driver availability, the available routes, and the loads you’ve already taken on.
The weight of the shipment is a significant factor. To control costs, you have to carefully manage the overall weight loading for your fleet. Higher rates may allow for rate reductions for shippers thereby lowering the rate, but still providing more revenue for you.
Calculate shipment density by dividing the cargo’s weight by its cubic feet.
In the freight logistics industry, each type of shipment has a specific classification. The National Motor Freight Traffic Association (NMFTA) has defined 18 classes of commodity shipments. Several factors determine freight class, including:
- Product density
- Product value
- Handling needs
The freight shipment classifications typically fall within one of the five most common freight shipping methods:
- Full truckload (FTL)
- Partial truckload (PTL)
- Less than truckload (LTL)
Full truckload (FTL)
As you’d expect, FTL applies to a shipment that takes up an entire trailer. It doesn’t matter whether it’s the smallest truck in your fleet or the largest. You’re using up the entire space within your hauler. Typically, FTL freight will exceed 15,000 pounds.
Partial truckload (PTL)
When a load doesn’t fill an entire trailer, it’s a partial truckload. Carriers can take on multiple loads to earn more per mile and maximize their earnings per trip. Partial truckloads are typically point-to-point, so freight loaded onto a truck stays on board until its destination. But with different shippers, there might be different locations.
PTLs are charged per mile, pro-rated by weight and dimension.
Less than truckload (LTL)
A less than truckload shipment is similar to a PTL. It doesn’t take up an entire trailer but might need to move between vehicles during the shipping process. Rates will also vary depending on whether you can match up freight from brokers with similar destinations.
An intermodal freight shipment includes multiple shipping methods. For example, if a load needs to ship by both road and rail, it’s intermodal. Because non-road rates are usually less expensive, intermodal shipping typically costs less. But it can also be less profitable for carriers if you’re not careful about estimating rates.
The highest rates typically come from expedited shipping. Freight transported in express shipping lanes, such as overnight or direct routes, command higher rates.
Dry van rates
Besides freight type, weight, and density, dry van rates are also impacted by other factors.
The biggest factor is delivery distance, which involves gas, vehicle wear and tear, and mileage. Rates also need to be calculated based on whether you’re using an established shipping lane between hubs or major cities or whether it’s a rural or atypical route.
Supply and demand
One frustrating thing for shippers, and why market rates can vary so greatly, is supply and demand. When you’re setting rates, you have to take into account the number of trucks and drivers available along with what you’ve already committed to handling.
Rates can also vary by season. For example, summer is often a heavy time for shipping fresh produce from agricultural areas. This can significantly impact the available trucks and rates.
Reefer freight rates
The same factors that apply to dry van freight also apply to reefer freight shipments of goods that require temperature control. Also, you need to take into account additional regulations which can impact pricing.
While all loads are subject to some regulations, perishable goods such as produce are also subject to state and local regulations. For example, some items might require inspection before being shipped across state lines. Other cargo types have to be shipped locally or only in designated areas, which can add costs due to loading, unloading, or working with other third-party carriers.
What types of trucking freight pay the best rates?
To maximize your profitability, you’ll obviously want to take on as many loads as possible that pay a higher trucking freight rate.
Typically, flatbed loads pay the best rates, but those can vary too if you’re carrying special equipment or a large haul that can’t fit into a container. LTL typically pay higher rates than full truckloads because drivers make multiple stops and might need to handle loading and unloading.
Routes and cargo also impact rates. Ice road truckers can command steeper rates because of the remote destinations and risks. The same goes for hauling hazardous materials.
How to find the best trucking freight rates
Find truck freight rate trends and estimates on load boards like Truckstop.com. You can check rates against hundreds of thousands of daily loads and a million power units. By filtering your results based on location, destination, trailer type, weight, dates, and other factors, you can see how what loads are available and view rate data.
With Truckstop.com, you can say goodbye to guesstimates. Get week-by-week and lane-by-lane forecasting trends from more than 160,000 active lanes. Using predictive data analysis helps you plan and compare your rates against regional trends to make the best freight rate decisions.
Benchmarking your rates in real-time helps you get better rates on every deal. Contact Truckstop.com today and see how our rate analysis can give you a competitive edge.