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Explanatory Notes
Know Your Costs!
The costs assembled in the cost tables result from a combination of the annual survey undertaken by the Road Haulage Association and DFF International research on vehicle costs. The figures are averages based on the numbers of vehicles for which relevant information was provided. They are averages; they are not your costs!
Accordingly, it would be dangerous and misleading for you to assume that the costs shown in the accompanying tables relate to your fleet. As part of our research we have compared our results with several of the published cost tables. The variations across those tables, for every cost except VED, are so staggering as to lend weight to our contention that depending on averages is simply untenable.
It is for this reason that, alongside the average costs for each type of vehicle as determined in the survey, there is a column in which you must insert the relevant comparable figures for the vehicles in your own fleet. In order to assist you with this, the following explanatory notes are provided.
Time-Related and Mileage-Related Costs
It is astonishing to us that so many vehicle operators still think and talk in terms of cost per mile or cost per day. This is encouraged by those tables which bring all costs together to produce such a figure. There is no such thing and it is dangerous to measure costs in such a way. Costs are an infinitely variable mixture of time-related and distance-related. Time-related costs are accruing even when the vehicle is not being used while the distances we may cover in any given period of time can vary enormously according to the type of work we are doing.
These tables are accordingly designed to arrive at a cost per average day (see below), which can be reduced to a cost per hour depending on the number of hours worked in a day, and then, quite separately, an average cost per mile actually run.
These tables are accordingly designed to arrive at a cost per average day, which can be reduced to a cost per hour depending on the number of hours worked in a day, and then, quite separately, an average cost per mile actually run.
(E.g. total time costs divided by days worked per annum)
These are given on a representative basis because of the enormous variations encountered. These arise from:
● Specification required in your particular operation.
● Discounts available.
● List price differences.
See also below under Average Depreciation/Residuals
One of the most vital keys to profitability is the number of days per annum you effectively use your vehicles. This governs the rate at which you can recover time-related costs, since these will mostly be accruing against you, whether you use the vehicle or not. You must accordingly determine, either from available records or from an informed view of your work, the number of days likely to be worked by each type of vehicle. In these tables, to be consistent, we have continued to assume 240 'Earning Days' throughout, but it is essential that you determine your own utilisation and hence your competitive edge. There is evidence to suggest that many hauliers are in fact achieving higher utilisation factors, particularly where multi-shifting is possible.
This is provided for information only. There are wide variations in this figure.
Average Depreciation/Residuals
There are many ways of providing for depreciation. In these Tables it is calculated on the basis of representative price, spread over the average depreciation period. Remember that the depreciation charged in your financial accounts, or allowed for tax purposes, is not likely to be applicable to your operating costs.
In practice you should be able to secure a residual value when you sell a vehicle, some of which may be guaranteed buy-back arrangements. The shorter the depreciation period, in comparison with useful life, the higher that residual should be. The longer the depreciation period, the lower the residual and where useful life and depreciation periods coincide, it is prudent to assume a zero residual.
Only you can determine which is most appropriate for you to use when assessing your costs; remember that competitive edge can also be gained by achieving a minimum depreciation figure, provided it genuinely reflects the whole life of vehicles in your operations.
Employment costs must cover actual weekly wages, holiday entitlements, relief drivers, sick leave, NIC and pension costs together with training.
Wages increased during the survey period by an average of 6%, including all the above elements.
It had been anticipated that the impact of the Road Transport Directive from April 2005 would lead to greatly reduced average working hours and hence correspondingly increased wage costs. In practice the impact has been softened by the ability to include “periods of availability” within average working hours. As a result it is still therefore appropriate to base wage costs on an average of 55 hours per week, incorporating the following basic rates::
Van drivers: £7.17 per hour LGV (C) drivers: £7.87 per hour LGV (C+E) drivers: £8.50 per hour
Revised vehicle insurance premium figures have been compiled using data from various sources including surveys and information provided by RHA Insurance. Premiums vary significantly; much depends on factors such as claims experience, type of haulage work undertaken and whether that work is international, where the business is based and fleet profile.
Savings on the average premiums shown may be achievable through RHA Insurance.
This has been estimated at a notional 9.0% on mid-life value, i.e. effectively half the original cost.
This again is the average obtained from the survey. You must assess the total overheads in your business and allocate them to vehicles. The simplest way of doing this is in proportion to gross weights. Remember also that if you run a business with other activities besides vehicle operations, only overheads attributable to the vehicles should be allocated to them.
Overheads are all business costs not specifically identified in the cost sheets. Typically, but not exclusively, they will include:
a) Management (including working directors), Supervisory and Clerical Salaries and Wages, including NHI and pension costs
b) Administration Overheads: Include total property costs (i.e. rents and rates paid, gas, water and electricity, property repairs, maintenance and insurance, cleaning and general household expenses), general office expenses, postage, telephone charges, legal fees, bank charges (not interest), insurances, hire of furniture and equipment, IT systems, depreciation of staff cars, breakdown vehicles and service vans, audit fees, management consultancy fees and sales promotion, bad debts and security services, welfare and ancillary wages.
c) Operational Overheads: Include carriers licence, price of sheets, ropes, dunnage, running of breakdown vehicles, service vans and staff cars, maintenance and cleaning of tanker/refrigerated/garage equipment, tachograph, tools and consumable materials.
Additional costs such as bonuses, excess hours and subsistence do not accrue on any consistent time or mileage-related basis. They are specifically individual both to companies and to individual jobs within those companies. They must, therefore, be allowed for on that basis and have not been included in these tables.
Mileage-Related Costs
These are based on a best view of industry averages, adjusted annually by reference to the survey.
Figures for these costs have been calculated as follows:
Fuel: Latest bulk diesel price against average consumption in survey. However, you will need to
keep a close watch on fuel prices and incorporate changes in your costs as they occur.
(Average price at 09.11.07 = 87.79 pence per litre = 399.1 pence per gallon).
Improved fuel-efficient driving means:
● lower costs
● improved profit margins
● reduced emissions
● improved environmental performance
Fuel cost calculation example 1:
| 3.5 tonne vehicle | Miles per annum | 42,000 |
| Miles per gallon | 27 | |
| =1,556 Gals | ||
| @£3.37 per Gal = £5,243 Annual Fuel Cost | ||
| Miles per annum | 42,000 | |
| Miles per gallon | 28 (+4%) | |
| =1,500 Gals | ||
| @£3.37 per Gal = £5,055 Annual Fuel Cost | ||
| Saving £188 | ||
To earn an extra £188 at 5% profit margin would require an additional £3,760 of Income.
Fuel cost calculation example 2:
| 44 tonne vehicle | Miles per annum | 69,000 |
| Miles per gallon | 6.9 | |
| =10,000 Gals | ||
| @£3.37 per Gal = £33,700 Annual Fuel Cost | ||
| Miles per annum | 69,000 | |
| Miles per gallon | 7.2 (+4%) | |
| =9,583 Gals | ||
| @£3.37 per Gal = £32,295 Annual Fuel Cost | ||
| Saving £1,405 | ||
To earn an extra £1,405 at 5% profit margin would require an additional £28,100 of Income.
However you buy your fuel, RHA UK Fuel Services provides a full range of fuel services. To help save you money, click on the following link for more information, www.rhafuel.co.uk
Lubricants: Included in maintenance (see below).
To understand how much your tyres cost you it is important to look at the whole life of your tyres rather than simply the purchase price.
To effectively compare tyre performance and cost, a pence per kilometre rate or PPK should be calculated. In this way it is possible to determine the actual consumption rate of your tyres in terms of both purchase price and tyre life. To calculate the PPK performance of your tyres and the annual cost of rubber consumption to your operations the following information is required:
● Initial purchase price of the tyres
● Vehicle Configuration
● Distance travelled per annum (Kilometres)
● Tyre life per axle (Kilometres)
The PPK rate can then be calculated using the following formula:
PPK = Initial Purchase Price (pence) / Tyre life (Km)
From this the annual cost of your tyres can be calculated.
Annual cost = PPK x Distance travelled per annum
This exercise can be repeated for all the tyres on a vehicle to provide a total vehicle tyre cost per annum.
For more information please visit, www.michelintransport.com
RepairsAll such costs have been included under this heading: however, routine servicing costs
and and contract repairs (which are often charged on a monthly basis) are frequently
Maintenance: recovered as a time-related item.
NOTE All of the costs we have outlined above will vary from operation to operation. This is why you must incorporate your own fleet figures when using these Tables.
