How to calculate cost per mile for trucking
Understanding the cost per mile for trucking is essential for any transportation business or individual truck owner. Knowing this calculation will help you make informed decisions regarding equipment investment, route planning, and pricing strategy. In this article, we’ll walk you through the process of calculating cost per mile for trucking and offer some tips to optimize your expenses.
Step 1: Identify Your Fixed Costs
Fixed costs are expenses that do not change regardless of the number of miles driven. These might include:
1. Truck payment or lease
2. Insurance (liability, cargo, etc.)
3. Licenses, permits, and compliance fees
Add up these costs to find your monthly fixed expenses.
Step 2: Identify Your Variable Expenses
Variable expenses change based on the number of miles driven and include:
3. Maintenance and repairs
5. Parking fees
For each of these items, you’ll need to track and record your actual expenses over a particular period (e.g., a month or a year). To calculate the total for each variable expense category, simply multiply the rate by the total number of miles driven during that period.
Step 3: Combine Fixed and Variable Expenses
To find your total monthly (or yearly) operating cost, add your fixed and variable expenses together.
Step 4: Determine Total Miles Driven
Keep track of the total number of miles driven during the period in which you’ve recorded your expenses (e.g., month or year).
Step 5: Calculate Cost Per Mile
Now that you have both your total operating expenses and total miles driven, divide your operating cost by total miles driven to find your cost per mile:
Cost Per Mile = Total Operating Expenses / Total Miles Driven
Calculating cost per mile for your trucking operation is a vital first step in understanding and optimizing your business. By regularly reviewing these numbers, you can identify areas for cost reduction and improve operational efficiency. Further, having a detailed understanding of your costs can help you negotiate better rates with clients, ensuring the long-term success of your business.