# Calculate Your Cost Per Mile

Updated September 2024.  Cost per mile (CPM) is a crucial metric for truckers, as it represents the total cost of operating your truck divided by the miles driven.

Understanding and managing it is essential for ensuring that your trucking business remains profitable. If you're not keeping a close eye on this figure, you may find yourself losing money on routes that seem profitable at first glance.

By calculating your CPM and comparing it to your projected revenue, you can accurately estimate the expected profit amount you get to keep after covering all expenses. Follow these steps to accurately calculate your cost per mile effectively:

## Step 1: Estimate Your Total Mileage

The foundation of your cost-per-mile calculation is the total number of miles you expect to drive each month. This total includes both compensated miles and deadhead miles (non-compensated).

On average, truckers drive around 8,400 miles per month, though this can vary. For the examples within this article, we'll assume an owner-operator drives 10,000 miles per month. Annually, most owner-operators report driving close to 100,000 miles.

## Step 2: Calculate Your Fixed Expenses

Fixed expenses are costs that remain constant regardless of how many miles you drive. Examples include truck payments, insurance, license plates, and permits. These costs remain whether your truck is parked or on the road.

Some fixed expenses, like license plates, are paid yearly rather than monthly. For instance, if your yearly license plate cost is \$1,500, you would allocate \$125 per month to this expense (\$1,500/12 = \$125). This approach ensures you account for all fixed costs in your cost-per-mile calculation.

Keep in mind that the more miles you drive, the lower your fixed expenses will be per mile.

## Step 3: Calculate Your Variable Expenses

Variable expenses fluctuate based on the number of miles you drive. These include costs directly tied to your mileage, such as fuel, maintenance, tires, meals, and communication expenses.

Take fuel as an example. You need to buy fuel for every mile you drive. If you drive more miles than usual in a week, your fuel costs will increase proportionally. Conversely, if you don't drive any miles each week, you won't have to pay for fuel that week.

## Step 4: Consider your Salary Costs

Salary costs are another essential component of your cost per mile, especially if you employ drivers or have a team supporting your operations. Whether you're paying yourself as the owner-operator or covering the wages of additional drivers, you should factor these costs into your CPM.

For owner-operators, it's important to include a reasonable salary in your calculations, even if you're not formally paying yourself a wage. This ensures that your business model is sustainable and compensates you fairly for your time and effort. If you employ other drivers, calculate their wages according to your payment structure, which may be based on miles driven, hours worked, or a fixed salary.

## Step 5: Now You Are Ready to Calculate Your Cost Per Mile

The final step is to combine your fixed expenses, salary costs, and variable expenses to calculate your total cost per mile. Divide your total monthly costs by the number of miles you drove that month.

For example, if your total monthly expenses (fixed + variable + salary) are \$10,930 and you drove 10,000 miles, your cost per mile would be \$1.093.

One key point to note is that while your fixed costs remain constant, your fixed cost per mile decreases as you drive more miles. Conversely, your variable cost per mile remains relatively stable regardless of mileage.

You might be interested in: Cost per mile calculator

## The Benefits of Knowing Your Cost Per Mile

1. Profitability Insight: It allows you to set competitive per-mile rates that cover your expenses and ensure profitability.
2. Cost Control: By identifying spending patterns, you can make informed decisions about where to cut costs if necessary.
3. Rate Negotiation: Equipped with this knowledge, you can confidently negotiate rates with shippers, knowing the minimum rate you need to cover your costs and achieve profitability.

The trucking industry presents both challenges and opportunities. Fluctuating fuel prices and rising maintenance costs are just a few of the hurdles you may face. However, staying vigilant about your cost per mile is crucial to maintaining a profitable operation. By thoroughly understanding your expenses, enhancing fuel efficiency, and utilizing financial tools like freight factoring, you can secure a competitive edge and ensure long-term profitability.

To effectively manage your cash flow and optimize your cost per mile, consider partnering with a trusted freight factoring service like Summar Financial. With immediate payment for your invoices, you'll have the financial stability to cover expenses promptly and keep your business moving forward successfully.