Understanding your cost per mile

One measure of an owner-operator’s success is how well you know the exact cost per mile it takes to operate profitably.

A number of factors go into determining the cost per mile. Let’s start with fixed costs — those costs that do not change. This includes the truck payment, monthly interest on the loan, insurance and license and permits. While fixed costs do not change, driving more miles will reduce the cost per mile. Here’s an example: If your fixed costs are $2,000 per month and you drive 10,000 miles, the cost per mile is 20 cents. Calculate this by dividing fixed costs by number of miles driven. If you drive 12,000 miles, the cost per mile goes down to 16.7 cents.

However, owner-operators have expenses other than fixed costs. Things like fuel, tires, maintenance, repair, meals, cellphones, lodging, wages and benefits, office rent and professional services like attorneys and accountants are called variable costs, and those change from month to month. Not every owner-operator has all these variable expenses, but if you rent an office you need to make sure to account for that cost. If you handle the accounting function yourself, you won’t need to include accounting fees in your calculation.

To get the real cost per mile you have to add the fixed expenses and the variable expenses and then divide that sum by the number of miles driven in a given month.

While the variable expenses will increase the more miles you drive — you’ll use more fuel, have more meals on the road — since your fixed costs stay the same your total cost per mile will come down. A rule of thumb is that the average owner-operator has a fixed cost of $115 per day with variable costs of 79 cents per mile. Keep in mind these are averages and your particular circumstances could result in different numbers. The important takeaway is to know the fixed and variable costs for our operation each month.

It’s important to know what your cost per mile is to determine if you are profitable. The goal is to get paid more than it costs you to operate your truck(s). It’s a good idea to figure your cost per mile each month so you can make an effort to control your variable costs or increase the number of miles you drive.

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Understanding your cost per mile