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By Mark Montague

Four years ago, I wrote a blog post with a catchy title: "The Death of the Buck-A-Mile Backhaul," where I explained that carriers could no longer cover costs on $1.00 per mile. At the time, those cheap hauls were going away.

In March 2012, there was only one major van lane paying $1.00 per mile: Philadelphia to Chicago, at 48¢ for the line haul, plus a fuel surcharge of 52¢. Of course, truckers were spending more than $4.00 per gallon for diesel in 2012, and a lot of other costs had also risen well above historical levels. 

Fuel costs are way down now -- and so is the surcharge, at 14¢ for vans last week -- but other costs have gone up. Total operational costs couldn't be covered at $1.00 a mile in 2012, and they can't be covered now.

Yet, I regret to say, the "buck-a-mile" backhaul has returned to U.S. highways. Sure, those low-priced backhauls are paired with higher-paying head hauls, but not all roundtrips average to a profitable rate per mile.

Here is a rough estimate of the costs per mile to operate a Class 8 truck. Everyone's costs are different, but let's assume for a minute that these numbers are about average. 



Here's some more detail. You can plug in your own numbers. 

  • Fuel costs averaged $2.02 per gallon in the U.S. last week. Depending where you filled your tank, your costs will vary. Divide your cost per gallon by your mileage -- let's call it an even six miles per gallon -- and you get fuel cost per mile of about 34¢. Compare that with March 2012, when fuel was averaging $4.14 per gallon, or March 2000, when it cost $1.49. Big differences there.
  • Equipment lease costs have changed, too. A tractor and trailer might cost more than $130,000 now, or you might get a good deal on used equipment. On the upside, interest rates are at historic lows, but you might have more overhead now than you did in 2012. Maybe you have additional equipment that is sitting idle, or you have to pay to park your rig. I estimated that costs rose 21% for leases and overhead in the past four years. 
  • Maintenance and tire costs vary, depending on make and age of equipment. It seems clear that these costs have gone up since 2012, so I'll add 6¢ to my previous estimate, for a total of 39¢ per mile. You can substitute your own numbers. 
  • Driver pay has definitely increased since 2012, and 45¢ per mile may be on the low side for some fleets. (If you're the driver as well as the owner, you might not think about driver pay as a cost. That's between you and your accountant, but don't forget to pay yourself.)



Find Your Break-Even Number

If you add up all those costs, you get to $1.59 per mile or more pretty quickly. Whatever that number is for you -- and yours may be higher, especially if you have additional employees, an office, a yard or other indirect costs -- that's your break-even number. You need to average $1.59 -- or whatever your break-even number is -- for all miles, just to keep from losing money. 

In other words, when you take those buck-a-mile backhauls, you need to make at least $2.18 per mile on the head haul. Why? The average of $2.18 + $1.00 is $1.59. Remember, this does not leave you any profit, but it covers the bills. 

You could park your truck instead, and you'd save on fuel, driver pay, and some portion of the maintenance and tires, but you'd still have to make that lease payment. That's an indirect cost. You pay it every month, whether your truck moves or not. 

Right now, the national average rate for vans is $1.55. Remember that low-priced backhaul from Chicago to Philly? It pays $1.10 per mile this week, and the head haul is paying $2.01, for a roundtrip average of $1.55. 

Two Ways to Make Money on Buck-A-Mile Backhauls

If your cost is $1.59, you have two choices:

1. Get Paid More. Plan your roundtrips, and know what rates to expect. Look for a TriHaul route through Pittsburgh (see below) -- or specialize in a desirable cargo type, or agree to take low-priced loads only when they go into a "Hot Market" where outbound rates are high.



2. Spend Less. If you can't find a way to make more money, you'll need to cut costs. Because if your costs are similar to my estimates, $1.55 is not a good average rate for you. You've heard all the advice: Run your rig at a steady 55 MPH, don't idle the engine unless you absolutely have to, avoid out-of-route miles, and minimize deadheads. Maintain your equipment, to prevent costly repairs. 

By Mark Montague
 
 
Freight rates for long-haul truckers fell across all truck types in February as weak demand and plentiful space on trucks continued to make life hard for fleet owners.

Spot market rates, or the prices shippers pay for freight loads booked individually through brokers rather than under a long-term contract, were down 18% in February compared with the same month a year ago for dry vans, the most common type of big rigs, according to online freight marketplace DAT Solutions.

Rates for refrigerated truck loads and flatbeds, which generally carry perishables and industrial equipment, respectively, both fell 14% in February, compared with a year earlier, DAT said. Spot-market rates for dry vans, which haul everything from consumer electronics to clothes, have declined steadily over the past year, while contract markets have remained about the same, according to DAT.

The problem for carriers is that shipping demand in the spot market is falling—demand for space on trucks was down 29% in February from a year ago, according to DAT, while capacity is rising, with truck availability growing 18% in February.

“The spot market is as weak as I’ve seen it, and capacity is as available as I’ve seen it in 10 years,” said Clay Gentry, a vice president with North Carolina-based Transportation Insight. “It’s that easy to cover freight. It’s very much a shipper’s market as of now.”

Mr. Gentry said that the proportion of shippers using long-term contracts to move freight had probably crept up in recent months as retailers and manufacturers sought to lock in space. But he said he expects spot rates to rise in the spring and through the summer as more agricultural shippers start moving produce and construction crews take advantage of warm weather to start work on projects, pushing more shipping demand from that sector.

“Business is slow,” said Leif Holm-Andersen, chief executive of Gantt Trucking, LLC, which runs a fleet of about 130 refrigerated trucks in Lexington, S.C. “There’s a softening in the number of loads we’re getting, but I’m hoping that by mid-March we’re going to be back where we should be.”

Spot market rates and loads inched upward during the first week of March, DAT said, a hint that things might improve for carriers as the weather warms.

Eileen Hart, vice president of marketing for DAT, said that another explanation for the softness in the spot market has been the lack of major winter storms. Extreme weather often forces shippers to place loads individually in the spot market to meet increased demand and account for truck drivers who have been stranded or delayed by extreme weather.

“In 2016 we’ve had a really mild winter,” Ms. Hart said. “You don’t have any of the stocking up that cripples the supply chains…so the smaller trucking companies are having a hard time finding enough freight to move.”

By ROBBIE WHELAN
 
 

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Despite greater demand for truckload services, national average van, reefer, and flatbed freight spot rates all slipped for the week ending Feb. 27 compared to the previous week, according to DAT Solutions and its network of load boards.

Overall, the number of loads jumped 8.5% while available truck capacity rose 1.2%.

Van load posts increased 3% while truck posts gained 2%. The load-to-truck ratio held steady with 1.4 van loads for every truck posted on the DAT network. The national average van rate declined 4 cents to $1.54 per mile while its down 8 cents from three week earlier. Outbound rates declined in Los Angeles, Dallas, and Columbus, but Atlanta rates rose modestly in the most recent week.

All reported rates include fuel surcharges.

Reefer load posts fell 2% and truck posts were up less than 1% last week. As a result, the load-to-truck ratio fell 2%, from 2.9 to 2.8 loads per truck. The national average reefer rate fell 5 cents to $1.79 per mile, the lowest out of the past four weeks.

Flatbed load volume rose again, up 17%, while available capacity decreased 2%. That yielded a 19% increase in the national load-to-truck ratio, up from 10.6 to 12.6 loads per truck. The national average flatbed rate gave up 3 cents last week to $1.80 per mile and down 5 cents from three weeks before.

This happened as the national average price of diesel rose 1 cent from the previous week to $1.99 per gallon.

Preliminary numbers show in February compared to the month before, spot market rates declined as the total number of posted loads fell 2.4% and available capacity rose 12% compared to January.

Rates are expected to rebound seasonally in March, according to DAT.

By Evan Lockridge