Last Updated May 14, 2024
When running your own trucking business, you’ll want to know how to calculate cost per mile (CPM). Understanding how much you spend to drive each mile provides crucial insights into how much you need to earn to make a profit. You can then identify ways to cut expenses, set rates appropriately, and ultimately improve your trucking business cash flow so that you can make the most of your career.
Continue reading for a full breakdown of calculating cost per mile, including the cost per mile formula you’ll need to have handy with an example of how to put that formula to use.
What Is Cost Per Mile?
Cost per mile is more than figuring out gas cost — though that is certainly part of it. Your cost per mile is a measurement of your total expenses during a month, quarter, or year, divided by the total number of miles driven. This tells you roughly how much you spend per mile driven.
Because of this, figuring out cost per mile requires that carriers track all expenses that could influence their work finances, including food and lodging receipts, truck fees and permits, insurance, and other business costs.
Why Is Figuring Out Cost Per Mile Important?
Calculating mileage costs is crucial for helping you run your trucking business effectively. When you regularly evaluate your cost per mile, you can identify areas where you are spending too much and need to reduce expenses. This information can also help you know how to calculate rate per mile with competitive freight rates that help you generate a profit.
With your cost per mile in mind, you can ensure you won’t lose money when you take on a load, since you’ll know how much you need to charge. This will help you avoid unprofitable jobs so you can grow your trucking business and enjoy a successful career as an owner-operator.
Components of Calculating Cost Per Mile
To accurately calculate your cost per mile, you have two main components that you’ll need to consider: your fixed expenses and your variable expenses.
Your fixed expenses are the costs that your trucking business incurs regardless of how many miles you drive. This includes items like insurance, lease or financing payments for your truck, permits, membership fees, license plate fees, and so on.
Variable expenses are the operating expenses that will change based on factors like mileage driven, routes, and the condition of your truck. These expenses can vary significantly from month to month or route to route. These expenses include fuel, meals, lodging, repairs and maintenance, tolls, and broker fees.
Your salary and other related expenses (like benefits and employment tax) will also be part of your cost per mile calculations. Finally, with all of these numbers in mind, you’ll also need to track the total mileage driven for the period that you’re measuring.
Trucking Cost Per Mile Calculator
Alternatively, if you don’t have time to do all of this manually, you can utilize an online trucking cost per mile calculator to more quickly find out your cost per mile.
Cost Per Mile Formula
Cost per mile calculations are relatively simple. Simply divide your total expenses by your total mileage:
Cost Per Mile = Total Expenses / Total Mileage
While this formula is very straightforward, it requires meticulous record-keeping and a fair amount of math to ensure you are accurately calculating the rate at which you’d need to break even.
How to Calculate Cost Per Mile (With an Example)
With the formula for cost per mile in mind, here’s a more detailed look at how you can break down your expenses to accurately measure this important metric.
1. Calculate Fixed Expenses
Start with your fixed expenses. These expenses will be the same no matter how many miles you drive in a given month. This will generally include your truck payments, insurance, and permits.
Of course, you probably don’t make monthly payments for each of these — for example, permits and license plate fees are often paid on a yearly basis. To include them in your calculations, take your yearly payment amount and divide it by 12. Use that result for your monthly calculations.
So, if your operating authority cost $300 to acquire, you would divide it by 12 to get the monthly cost of $25.
An example of fixed expenses for calculating your cost per mile could include:
- Truck payment: $2,600
- Insurance total: $800
- Permits: $50
- Total: $2,730
While this number should remain consistent from month to month, you should review it when renewing your insurance or license plate, as those fees often change at renewal.
2. Add Up Variable Expenses
With fixed expenses figured out, you’ll next need to add up your variable expenses for the month. These expenses can differ significantly from month to month, usually based on your total mileage and the number of loads you hauled.
The best way to calculate variable costs is to keep and record receipts for all expenses in a given month. Other tools, like a fuel cost estimator, can help you get a rough estimate when you don’t have all of your receipts handy. A cost per mile app can also help you easily record and add up expenses so you don’t lose track of anything.
A month of variable expenses could look like this:
- Fuel: $3,017
- Food: $500
- Lodging: $300
- Tolls: $100
- Maintenance and repairs: $738
- Freight-related costs (brokers, dispatching services, etc): $1,500
- Miscellaneous expenses: $218
- Total: $6,373
Simply add up the totals for every variable expense each month — no division necessary.
3. Add in Salary Costs
Salary expenses are another important consideration for carriers. These expenses include wages, benefits, and employment taxes. Your trucking salary can be a fixed expense if you pay yourself a set monthly salary, or it could be variable if you pay yourself a per-mile rate (in which case you should use a truck driver pay per mile calculator to determine an appropriate pay rate).
Regardless of how you calculate your salary, these expenses should also be part of your cost per mile considerations. So, if you pay yourself a monthly salary of $5,500 from your trucking business, you would include that total each month.
4. Add All Expenses and Divide by Total Mileage
Your last step is to add up all of your expenses and divide them by your total mileage. For the sake of our example, your total expenses would be:
$2,730 + $6,373 + $5,500 = $14,603
If you drove 5,000 miles in a month, you would then calculate your cost per mile as:
$14,603/5,000 = $2.92
So in this case, your cost per mile is $2.92.
Tips to Reduce Cost Per Mile
Finding ways to reduce your cost per mile can play a critical role in maintaining a profitable trucking business.
Optimize Routes
77% of owner-operators have reported booking shorter routes to offset rising costs. Regardless of the length of your route, however, you can lower your cost per mile by taking the most efficient route. Accounting for factors like the location of each individual stop, truck capacity, traffic conditions, and customer availability will help you optimize your routes for more efficient driving. Reduced time on the road will lower fuel and maintenance costs, regardless of the number of loads you decide to haul.
Prioritize Pre-Trip and Post-Trip Inspections
Pre-trip and post-trip inspections allow you to identify relatively small maintenance issues before they grow into larger problems. Being vigilant about these inspections will help you address these concerns while they are relatively inexpensive and less time-consuming. On the other hand, putting off needed repairs could result in major expenses that keep your truck out of commission for an extended period of time.
Lower Food Costs
Eating out can add up quickly. Cooking equipment like a mini fridge, microwave, or even a crockpot or electric skillet can help you save money by making it easier to buy groceries ahead of time and prepare food yourself. This will help you avoid buying from pricier fast food restaurants or truck stops.
Reduce Fuel Consumption
There are a variety of simple tricks that can reduce fuel consumption (and your cost per mile). Maintaining a speed between 55 and 60 MPH can help maximize your fuel efficiency, as will using cruise control when driving on a straight highway when conditions allow. Investing in a climate control system or APU can also lead to long-term savings by reducing the need to idle your truck.
Cost Per Mile FAQs
What does CPM stand for in trucking?
CPM stands for cost per mile — the amount you spend to operate your trucking business on a per mile basis. Understanding how to calculate CPM in trucking can help you set rates, choose more profitable routes, and make other important business decisions.
What is the average trucking cost per mile in 2023?
According to the American Transportation Research Institute, the average cost per mile in 2021 was $1.855, up 12.7% from 2020.
What’s a good trucking cost per mile?
The best way to answer this is to ask yourself, “What is the average cost per mile in trucking?” Variable expenses such as fuel can cause your trucking cost per mile to go up or down over the course of the year. You should try to keep your cost per mile within ten cents of the current average for your region.
Where can I find a trucking cost per mile calculator?
You can find and use a trucking cost per mile calculator at motorcarrierhq.com.
Jim is the General Manager of altLINE by The Southern Bank. altLINE partners with lenders nationwide to provide invoice factoring and accounts receivable financing to their small and medium-sized business customers. altLINE is a direct bank lender and a division of The Southern Bank Company, a community bank originally founded in 1936.
