Guide
Cost Per Mile and Per-Truck Profitability
Cost per mile is the number that turns a rate offer into a decision. Without it, a haulier is comparing this week's offer to last week's offer, which tells you which is higher but not whether either is enough.
The arithmetic is not difficult. What makes it useful is being honest about the costs that do not arrive monthly: the tyres, the clutch, the week the truck is off the road, and the owner's own driving time if it is going unpaid.
Last reviewed
Written by the HGV Accountants editorial team
- Who this is for
- HGV owner-drivers and small fleet operators who are quoting rates without knowing their own cost base.
- The problem
- A rate is only good or bad relative to what the mile costs you, and most operators have never worked that number out for their own vehicle.
Work Out Your Own Figure
Fill in what you actually spend over a year. The result is illustrative and does not replace management accounts, but it is close enough to tell you whether a rate is viable.
Cost Per Mile Calculator
Your figures, your vehicle
Cost per mile, all miles
£1.75
- Break-even per revenue mile
- £2.06
- Rate at 10% margin
- £2.29
- Total annual cost
- £140,099
- Revenue-earning miles
- 68,000
- Diesel used
- 45,461 litres
Where the money goes
- Fuel£59,099 42%
- Driver cost£42,000 30%
- Finance or lease£18,000 13%
- Repairs and maintenance£6,000 4%
- Overheads£6,000 4%
- Insurance£4,500 3%
- Tyres£2,500 2%
- Tax, levy and compliance£2,000 1%
Illustrative only. It uses annual figures for one vehicle and does not account for seasonality, payment terms, a truck under warranty or a major failure. It does not replace management accounts. The starting figures are round numbers to be overwritten, not an industry average.
The Costs That Get Missed
| Cost | Why it gets missed | How to bring it in |
|---|---|---|
| Tyres | Bought a few at a time, in different months | Divide the expected annual spend by the miles run |
| Major repairs | Feels like bad luck rather than a cost | Provide monthly against the known service and repair cycle |
| Downtime | Nothing leaves the bank account | Cost the days off the road at the revenue they would have earned |
| Owner's driving time | Drawings look like profit | Put a driver's wage in the cost base, then look at what is left |
| Empty running | Miles are miles | Split total miles from revenue-earning miles and price on the second |
| Depreciation | The finance payment feels like the cost | The truck is worth less each year whether or not it is financed |
Why Empty Running Changes the Answer
An empty mile burns diesel, wears tyres, uses the driver's hours and brings in nothing. If a fifth of your mileage is empty, every loaded mile has to carry its own cost plus a quarter of an empty one. That is why two operators with identical cost bases can need materially different rates.
This is also the cheapest thing to improve. A backload that covers its marginal fuel cost improves the position even at a rate that looks poor in isolation, because the truck was going to make the journey anyway.
Turning Cost Per Mile Into a Rate
- 01Total the annual cost of running the vehicle, including the driver and a fair share of overheads.
- 02Divide by total miles to get cost per mile. This is what the truck costs to move, loaded or not.
- 03Divide by revenue-earning miles to get the break-even rate. This is the minimum a paying mile has to earn.
- 04Add the margin the business needs, calculated on the rate rather than as a mark-up on cost, so a ten per cent margin means cost is ninety per cent of the rate.
- 05Compare that figure with what you are actually being paid, by customer. The comparison is usually more interesting than the number itself.
Common Questions
Should I include my own wages in cost per mile?
Yes, if you drive. If the owner's time is free, the cost per mile is understated by whatever a replacement driver would cost, and the business will look profitable right up to the day you need to hire somebody to do the driving.
Do I use the pump price of diesel or the price net of VAT?
If you are VAT registered, use the net price, because the VAT is recoverable and is not a cost to the business. If you are not registered, use the price you actually pay at the pump.
What mpg should I use?
The one you actually achieve, taken from fuel card litres against tachograph or telematics miles over several months. Manufacturer figures and single good weeks both flatter the answer, and the whole point of the exercise is to stop flattering it.
How do I cost a truck that is paid for?
It still has a cost. The vehicle is worth less each year, and at some point it has to be replaced. Put a replacement provision in the cost base rather than treating an owned truck as free to run, or the year you replace it will look catastrophic against years that were quietly overstated.
Related Guides
- Fuel Cards and VATWhy the bank payment is not the entry, and how to make the VAT on diesel actually recoverable.
- Buying or Financing a TruckHire purchase, lease or contract hire, and what each does to tax, VAT and the bank balance.
- O-Licence Financial StandingHow much has to be available, how it is evidenced, and what happens if the balance falls.
A Fixed Quote for the Truck or the Fleet
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- We tell you if you do not need what you asked for
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