Posted by: jmwilsonmga | October 30, 2012

What Does It Cost to Operate a Commercial Vehicle? Guest Blogger : Tommy Ruke

Have you ever been driving down the highway and wondered what it costs to operate a commercial motor vehicle?  As someone who has been underwriting commercial transportation business for over thirty years, I often ask myself that question.  Recently an expert in the trucking insurance industry, Tommy Ruke, shared his thoughts on this topic. Tommy Ruke, CIC, CPIA, CWIS is the President of Insurance Business Consultants and a thirty-eight year veteran of the insurance industry.  He has served as a member of the National Faculty with the Society of Certified Insurance Counselors, as a past member of the Board of Governors and the National Education Committee.  He instructs James K. Ruble CIC seminars, as well as works closely with the American Association of Managing General Agents (AAMGA) including instructing AAMGA courses.

Without further ado, here are Tommy’s thoughts.

“What does it cost to operate a commercial motor vehicle?  Would you believe $1.706 a mile?  Any business that is successful has a business plan and knows their cost.  It is always helpful to have a “benchmark” to compare your business with other similar businesses.

Knowing the cost to operate a business is also helpful when dealing with customers as to how much the business is charging the customer for its services.  It becomes more effective when there is “public” information from a recognized source to use in these discussions.

There is such a source – The American Transportation Research Institute’s (ATRI) Annual Analysis of the Operation Costs of Trucking.  The 2012 Update has just been released and you can find it on their website www.atri-online.org.

Long, long ago in a “different” world, we said that a trucker should have receipts of a dollar a mile, should operate 100,000 miles a year (if operating beyond a 300 mile radius and less than 500 miles), so income of $100,000 a year.  This “benchmark” was good for 20 years (from 1980 after deregulation to the 2000’s).  When ATRI came out with their first study in 2008 it “shocked” me and others in the insurance industry and some people in the transportation industry.

You need to download the complete report to understand the background.  The study was “ordered” by the government to tell them what a truck driving over the public highways contributed to the economy.  The information is just that – what it cost for every mile driven.  This is different from miles that the trucker is being paid to haul a load.  When looking at the cost a motor carrier needs to understand that 10-15% of miles driven are unloaded (dead head), non-premium miles.  The second consideration is that it is just the cost of the truck.  It does not count the “other business expenses” like office, dispatch, interest on loans, other equipment, bad debt and other miscellaneous items.

The latest study reflects a cost of $1.706 a mile which is up from 2010’s $1.548 and is the highest in the four-year study.  The biggest cost increase is the cost of fuel and oil which is no surprise.  That cost has gone from $19.41 in 2010 to $23.58 on 2011.  The cost of insurance also reflects a change from $2.22 in 2008 to $2.67 in 2011 – a 23% increase.

As discussed in a previous blog, a motor carrier can reduce their cost of fuel by simply operating their equipment at a lower speed.  Fuel and oil are the most costly items and the motor carrier has some control by lowering their speed.

One other consideration is that the recent increase in the cost of fuel in 2013 which is not a part of this report will put pressure on the motor carrier’s current operation.  We all need to be aware that in most cases there will be more cost today than six months ago so more money difficulties for truckers and insurance carriers.

I hope this information is helpful and make sure to download the full study.”

If you would like to be added to Tommy’s blog mailing list, please send an email to trs@ibci.net.

Here is a direct link to the research Tommy referenced : http://atri-online.org/2012/09/17/an-analysis-of-the-operational-costs-of-trucking-a-2012-update/

Thank you to Tommy for allowing us to share his great article!

Introduction by : Sandi Fritz, Vice President, Branch Offices

Sandi Fritz joined J.M. Wilson in 1981 and currently serves as the Vice President, Branch Offices.  She manages the transportation team in Michigan and in the branch offices, as well as works with our companies to foster relationships, communication, training, and goals.  She also manages each of our branch offices helping them to meet their goals, communicate, and train.  Sandi loves everything about insurance.  She can’t imagine doing anything else, anywhere else.  She loves helping people write business and meet goals.  Sandi feels very privileged to have met and known some of the greatest people in the insurance industry.  In her free time, Sandi enjoys being involved with her church, running, biking, skiing, and spending time on the beach.

Disclaimer :  This article is for informational purposes only.  There is no legal advice being suggested or proffered.  The author assumes no responsibility or liability for the actions taken or not taken by the readers based upon such information.  This article is the opinion of the author and is not supported or endorsed by J.M. Wilson.  It should not be relied upon and may contain inaccuracies or content may have changed over time, contact your underwriter for the most current and accurate information.  Any comments or responses are the opinions of their authors.  Content on this site is believed to be covered under Fair Use. Legal

Copyright 2012 J.M. Wilson Corporation

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Responses

  1. Most interesting. Enjoy Tommy’s insights!

    • Thanks for sharing your thoughts!


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