How to Determine Fuel Cost Per Mile

How to Determine Fuel Cost Per Mile

For drivers under authority and owner-operators, it is important to know how much their business is going to cost them. Without knowing their business costs, it can be difficult to ensure your trucking business is successful. Not only is it important to know and understand your costs, but it is important to know how to keep your costs low. There are many tools for owner-operators within the OOIDA Foundation’s Cost of Operation Spreadsheet that can help drivers.
calculating fuel costs

Determine Cost Per Mile

How Many Miles You Will Drive?

To come up with the number of miles you drive, calculate the miles you will drive each month. These miles will include both compensation and non-compensated (deadhead) miles. Below is an example of how to track your cost per mile for a driver that averages 8,400 miles a month. While this number can be different for you, this is just an example. Typically, most owner-operators drive about 100,000 miles per year.

Calculate Your Fixed Expenses

Your fixed expenses are the costs that do not fluctuate each month. This number will not change no matter the number of miles you drive monthly. Fixed expenses can include your monthly truck payment, truck insurance, permits, and license plate expenses.

Below is an example of an owner-operator starter cost.

Monthly Fixed Costs
Truck Payments $1,400
Trailer Payments
Collision Insurance $480
Deadhead Insurance $60
Cargo Insurance
Health Insurance $400
Workmen’s Comp Insurance
License Plates $120
Permits $50
Parking Expenses
Total Amount $2,515

While some of these expenses are paid yearly, there are some that you must make monthly. Typically, your license plate expenses are paid each year. For license plates – $125 a month equals out to being $1,500 a year.

Calculate Your Variable Expenses

Your variable expenses are those that are related to every mile you drive. These expenses can go up or down, depending on the amount of driving time you have each month. A good example of a variable expense is fuel costs. If you do not drive one month very much, your variable expense can be much lower. On the flip side, if you increase your driving miles, your fuel cost will increase as well.

Some variable expense examples include, meal costs, phone charges, tires, maintenance, and fuel.

Monthly Variable Costs
Fuel $2,000
Lodging and Meals $600
Phone Charges $100
Satellite
Tolls $160
Loading and Unloading Fees
Tires $300
Maintenance Repairs $450
Repairs $600
Factoring Fees
Broker Fees $1,125
Misc. Expenses $450
Total Amount $5,845

Typically, the higher variable expenses are going to be your fuel costs and broker fees. By lowering your fuel costs and replacing brokers with personal clients, this can lead to a lower cost per mile, and you can see your profits increase.

Calculate Your Cost per Mile

Lastly, you will need to put all the totals together from your fixed and variable expenses. To accurately calculate your cost per mile, you will need to divide your total cost by the number of miles you drive for the month.

Example: $2,515 (fixed expenses) by 8,400 (your miles) – these equal $0.30 per mile. Then you do the same thing for the variable expenses. $5,845 (variable expenses) by 8,400 (your miles) – which equals $0.70 per mile. Add $0.30 and $0.70, which is $1.00 total cost per mile.

Below are all of the expenses together for a final summary.

Financial Summary
Monthly Miles 8,400
Fixed Costs Per Mile $0.30
Variable Costs Per Mile $0.70
Estimated Cost Per Mile $1.00
Monthly Variable Costs
Fuel $2,000
Lodging and Meals $600
Phone Charges $100
Satellite
Tolls $160
Loading and Unloading Fees
Tires $300
Maintenance Repairs $450
Repairs $600
Factoring Fees
Broker Fees $1,125
Misc. Expenses $450
Total Amount $5,845
Monthly Fixed Costs
Truck Payments $1,400
Trailer Payments
Collision Insurance $480
Deadhead Insurance $60
Cargo Insurance
Health Insurance $400
Workmen’s Comp Insurance
License Plates $120
Permits $50
Parking Expenses
Total Amount $2,515

By looking at the above information, it shows that if you drive approximately 8,400 miles a month, you get $1.00 per mile to cover your expenses. Anything over $1.00 is your business profit. What this means is if you charge $2.00 per mile, you are profiting $1.00 per mile.

Accurately Calculating your Cost per Mile

To determine if you are getting an accurate number for your cost per mile, it is advised you use accounting software. Some drivers use TruckBytes, where you can receive the basic software at no additional cost. This is a benefit for those new owner-operators who are just beginning and are on a tight budget.