Owner-Operator Cost Per Mile Explained With an Example

Fixed costs and variable costs, in plain words

Fixed costs are the bills that arrive whether the wheels turn or not. Typical ones are the truck payment or lease, insurance, permits and licenses, electronic logging and software subscriptions, and the cost of keeping your books. If a bill is paid once a year, divide it by twelve so it shows up in every month.

Variable costs rise and fall with miles. Fuel is the big one. Maintenance and repairs, tires, tolls and scale fees also move with how far you drive. Repairs and tires are lumpy in real life, so smooth them out. Take what you actually spent over the last six or twelve months and divide by the number of months, then use that as a monthly set-aside.

Your own pay is a separate question. Some owners treat a driver wage as a cost and profit as what is left after it. Others look at profit as the whole paycheck. Either way works, as long as you pick one and use it every month.

The formula

Cost per mile equals total monthly costs divided by total miles driven that month. Total miles means every mile the truck moved, loaded or empty. You can also split it in two: fixed costs divided by miles gives your fixed cost per mile, and variable costs divided by miles gives your variable cost per mile. Add the two and you get the same total.

The split is useful because the two halves behave differently. Variable cost per mile stays fairly steady. Fixed cost per mile gets smaller when you drive more and larger when you drive less, because the same bills are spread across fewer miles.

A worked example for one invented truck

Here is one month for an invented truck. Fixed costs: truck payment 1,850 dollars, insurance 1,200 dollars (that is a 14,400 dollar yearly premium divided by 12), permits and fees 150 dollars, logging device and software 60 dollars, and bookkeeping 90 dollars. Fixed total: 3,350 dollars.

Variable costs: the truck ran 10,000 miles at 6.25 miles per gallon, which is 1,600 gallons. At an invented fuel price of 4.00 dollars a gallon, fuel is 6,400 dollars. Maintenance and repairs are set aside at 1,300 dollars a month (7,800 dollars over six months divided by 6). Tires are 400 dollars a month (4,800 dollars a year divided by 12). Tolls and scale fees are 350 dollars. Variable total: 8,450 dollars.

All in, the month cost 3,350 plus 8,450, which is 11,800 dollars. Divided by 10,000 total miles, cost per total mile is 1.18 dollars. The split shows fixed at 0.335 dollars a mile and variable at 0.845 dollars a mile, which add back to 1.18.

Cost per loaded mile versus cost per total mile

Loaded miles are the miles you drive with freight. Total miles also include deadhead, the empty miles to reach the pickup or to reposition. In our month, 8,500 of the 10,000 miles were loaded and 1,500 were empty.

The empty miles cost the same to drive as the loaded ones, but nobody pays for them directly. So the cost of the whole month has to be recovered from the loaded miles. Divide 11,800 dollars by 8,500 loaded miles and the cost per loaded mile is about 1.39 dollars. That is the number to compare against a rate quoted per loaded mile. Quoting yourself 1.18 against a loaded-mile rate would make every load look better than it is.

Keep both figures. Cost per total mile is good for tracking the health of the business month to month. Cost per loaded mile is what a rate has to beat.

What a load must pay to hit a target profit per mile

Pick a profit you want for every mile the truck moves. Say it is 0.30 dollars per total mile. Add it to cost: 1.18 plus 0.30 is 1.48 dollars of revenue needed per total mile. Over 10,000 miles that is 14,800 dollars of revenue and 3,000 dollars of profit for the month.

To turn it into a loaded-mile rate, spread the 14,800 dollars across the 8,500 loaded miles. That gives about 1.74 dollars per loaded mile as the month-wide target.

For a single load, use that load's own miles. Suppose a pickup is 90 empty miles away and the load runs 600 loaded miles. Total miles are 690. At 1.48 dollars per total mile the load should pay 1,021.20 dollars, which works out to about 1.70 per loaded mile. If a broker offers 900 dollars, you would earn 85.80 dollars after the 814.20 dollars it costs to run those miles, or roughly 0.12 dollars per total mile. That is well short of the 0.30 target, and now you know it before you say yes.

What happens when miles drop

Try the same truck with only 8,000 total miles in a slow month. Variable costs scale down with the miles, so they stay near 0.845 per mile. The fixed 3,350 dollars now spreads over fewer miles, about 0.419 per mile. Cost per mile rises to roughly 1.26 dollars. Same truck, same bills, higher floor. This is why a rate that worked last month can lose money this month, and why recalculating each month matters.

Common mistakes

Leaving out deadhead. If you divide costs by loaded miles only and then compare that to a total-mile figure, or the other way round, the answer is wrong. Decide which you are measuring and label it.

Forgetting repairs. Costs that do not hit every month still belong in every month. A truck that costs nothing to repair in March will cost something later, so set it aside.

Mixing months. Fuel from one month, insurance from a quarterly bill and miles from a different month make a number that means nothing. Use one calendar month, all costs and miles from that month, with yearly bills divided by twelve.

Counting a cost twice. If fuel cards are paid off in the following month, count the fuel once, in the month it was used. Also keep tax rules out of this math. Which costs are deductible is a question for your tax preparer.

Putting it into your routine

Pull the month's costs from your books, total your miles from your logs, and divide. The free owner-operator cost per mile calculator at /bookkeeping/owner-operator-cost-per-mile-calculator does the division for you. If you want the monthly numbers kept for you, MCC Solutions LLC offers bookkeeping support for small trucking businesses.

Common questions

This guide is general information, not tax, legal or accounting advice. Rules, fees and due dates change; check with the IRS, the NJ Division of Taxation or a licensed professional for your situation.