What is Free On Board (FOB)?

If you speak to freight brokers in Chicago or truckers about their secret to success, the standard answer that you will get is that the only way to make money in the trucking business is not to spend any money. This is an important fact you must keep in mind as you learn how to calculate trucking rates. This is because the business of trucking has razor-thin margins and ever-growing risks and curveballs. If you don’t balance everything out perfectly, you stand to make losses or only break-even, regardless of how many miles you cover.

Workers in the trucking business are always on the road. Taking time to determine the ideal truck rate per km is the key to ensuring they remain profitable. Needless to say, this is not an easy goal to hit. There are countless factors that must be considered, and most of these factors keep on changing. To help you better calculate trucking rates per mile, this post will focus on the operating expenses trucking companies have to keep an eye on, as well as share tips on how to calculate the cost per mile freight truck.

Operating Costs

To be able to know what is the average per mile cost of trucking, it is imperative that you account for all the operating expenses truckers have to deal with. With the exception of the specialized operating models, the expenses in trucking fall between $1.16 and $3.05 per mile. This means, in the real world, no trucker can achieve an average operating cost per total mile of $1.16. Truckers can also not survive with $3.05 per mile. Considering the pricing mechanism in trucking is the mile, it is crucial that you understand your expenses relative to the miles you generate in your truck per week or per month. Doing this will help achieve a more accurate figure on your current freight rates per mile. Here are the average operating costs per mile for truckers.

1. Driver Compensation

As for the question of what truck drivers get paid per mile, the answer is $0.48 to $0.83 per mile. This does not, however, mean that independent contractors avoid driver compensation and instead turn that into profit. Successful independent contractors pay themselves market wages in addition to the projected profit.

Driver compensation is the most considerable expense for a trucking company. Depending on the operating mode, length of haul, and geographic region, driver compensation, payroll taxes, and benefits range from 28% to about 50% of the total revenue. The industry average for the total driving labor expenses per mile falls between $0.49 and $0.83. This equates to an average of $0.67 per mile. The amount includes incentive compensation, base wages, accessorial pay, per diem, health insurance, retirement benefits, and workers’ compensation.

2. Fuel

Fuel makes up the second largest expense for trucking companies. The ‘net fuel expense’ calculation is used to determine the difference between a bottom and top performer in the trucking business. Net fuel expense is the total gross fuel receipts. This includes taxes and additives minus the fuel surcharge that is generated.

Top-performing truckers focus on some of these practices and items in order to cut back on gross fuel expenditure:

  • Reducing idle time and speed as well as maintaining proper shifting patterns
  • Investing in fuel-saving technologies, practices, and equipment
  • Reducing empty miles
  • Maximizing ‘in network’ fuel expenditure. The more fuel you buy, the lower the net fuel per liter/gallon

The average cost of fuel is between $0.40 and $0.55 per mile. However, if you work with a trucking company that acts on the fuel surcharge as well as the aforementioned practices, you can reduce the net fuel expenditure dramatically.

3. Equipment Financing Expense

Truckers definitely need a truck to operate. The truck must be appropriately maintained to offer the best performance. The average age of trucks used in fleets is 2.3 years. This is the case because younger equipment has a reduced total tractor lifecycle expense. Due to maintenance costs and the cost of leasing or financing the purchase of a truck, the cost of financing trailers and trucks ranges from 0% to 30%. The cost per mile for equipment financing expenses falls between $0.00 and $0.40.

4. Maintenance Costs

When calculating the average cost per mile for truckload freight, you must consider maintenance. Maintenance accounts for the largest margin opportunity for trucking companies. The maintenance costs capture labor, tires, parts, oil, lube, supplies, and fixed overhead (utilities, tools, shop rent, etc.). The difference between top performance in maintenance and bottom performers ranges from $0.09 to $0.40 per mile.

5. Insurance

Insurance refers to the cost of physical damage, liability, as well as cargo insurance premiums and deductibles. The cost of other accident-related damages is often overlooked or categorized inappropriately as maintenance expense. The average cost of insurance ranges from $0.06 to $0.18 per mile.

6. Variable Driving Expenses

This includes permits, fines, tolls, motels, driver orientation, lumper fees, and recruiting expenses. These costs have to be considered to ensure you are never caught unawares. On average, this will cost between $0.01 and $0.09 per mile.

7. Non-driver Wages and Benefits

Independent contractors mostly don’t have to worry about these expenses because they handle everything themselves. Trucking companies, on the other hand, have to account for the cost of hiring people for dispatch, sales, safety roles, and finance. On average, there will be one non-driver for 3 to 6 drivers. For smaller fleets, the cost of non-driving positions will take as much as 15% of the revenue. The cost for non-drivers can, however, be reduced by automating processes. On average, non-driver wages and expenses cost $0.06 to $0.30 per mile.

8. Fixed Overhead

This accounts for office supplies, rent, utilities, communication, software, and other expenses. The cost of fixed overhead is close to the cost of non-driver wages. It can be charged at a rate of between $0.06 to $0.30 per mile.

The above are the main expenses that impact the average cost of freight per mile. All the same, you cannot simply take the sum of these expenses to establish the total operating costs per mile. The trucking industry has countless operating models and modes. Granted, understanding the above numbers and their impact on the margin equation will help you negotiate the best rate per mile.


Calculating Truck Freight Rates

Now that you are familiar with the operating expenses, it is time to learn how to calculate the average cost per mile for truckload freight. Like with most trades jobs, many considerations must be made when calculating the preferred trucking rates per mile.

The truck rate per mile is the price a broker or a shipper should pay to haul a load. While the idea is quite simple, the trucking rates per mile vary depending on several things, including what time of the year it is as well as the general cost of fuel. The constant, however, is that the rates are determined per mile. This means the most critical factor is the miles covered from the start to the destination.

Accurate information on trucking freight rates and the accurate rate per mile is the key to correctly pricing trips. This information will further help to negotiate the best rates. Below are the key factors you have to calculate when determining a per-mile rate.

1. Travel Distance

The distance from the starting point to the destination is the most important when calculating the truck rate per km. You must make sure to get the correct distance from the start of the trip to avoid surprises. Before the start of the journey, ensure that the driver does not need to make long detours due to road closures. This is important because not accounting for these detours will end up costing you more and affect timing.

2. Shipment Weight  

Capturing the correct miles covered is not enough. Before you set an average rate per mile for truck drivers, you will need to consider the shipment’s weight. The heavier a load is, the more expensive it will be for you to transport. With that in mind, it is good to consider such variables as FTL trucking rates, heavy haul rates per mile, passenger numbers, etc. It is always good to note that most trucking companies will quote a higher per-mile rate. It is up to the client to bargain. How well a customer negotiates will depend on how knowledgeable they are on the trucking rates.

  • Heavy haul trucking rates

When determining the average cost per mile for truckload freight, trucking companies fix a price based on such factors as fuel expenses, truck repair & maintenance expenses, toll & highway fare, and automotive insurance for their truck. When setting a rate, it is crucial for the trucker to strike the perfect balance. Trucking companies know that a low-priced rate can lead to losses, whereas an overpriced rate can push customers to other cheaper companies. The best way to remain profitable and competitive is by keeping pace with both the local and national trucking rates. Truckers are able to retain more customers when they charge a reasonable rate and offer excellent services.

  • Flatbed truck rates per mile

The national mean flatbed truck rates stand at $3.14 per mile. To determine a fair rate for flatbed truck services, you have to consider several things, including the type of trailer, the ratio of load-to-truck, cargo weight, destination, and additional services, such as loading, oversized loads, unloading, and warehousing.


3. Shipment Density

This refers to the amount of room a shipment takes in the truck. If a shipment occupies too much room, even if it is not heavy, it will not be possible to transport other items to spread out the costs. As a result, shipments that take up more room will cost you more to transport. The shipment density is calculated by dividing the weight of the cargo by its cubic feet.

4. Freight Classification

The classification of the cargo will impact the average freight rate per mile. The NMFTA (National Motor Freight Traffic Association) has a total of 18 defined classes of shipment. The classification of freight is determined by factors such as:

  • Stow ability
  • Product value
  • Product density
  • Liability
  • Handling needs

To correctly calculate the best average cost of freight per mile, you must acquaint yourself with the factors used to determine freight classification. Understanding the classification of the item you plan on transporting will help negotiate the best rate per mile.

Bottom Line

To set fair trucking rates per mile, a trucking company should be able to pay truckers fair wages, keeping clients happy and still making a good profit. This is not an easy goal to attain, especially bearing in mind all the expenses truckers have to account for. Basic knowledge of the industry will help you understand the factors that will influence truck rates and help you keep up with the trends.

Do you want to learn more about the average per-mile cost of trucking? Are you looking for a reliable team to transport your shipment? Amplify Logistics is a reputable freight shipping and transport company that serves the whole of North America. Get in touch now to find out more.