Apples & Oranges
by Jim Park
A buck a mile is a buck a mile, right? Nope. And the difference could be a few thousand bucks a year in your pocket.
Trying to sort out which carrier offers the best package can get pretty darned confusing. Before you sit down for your next job interview, and this goes for company drivers as well as owner-operators, sit down and do some digging. Here's a way to chart and analyze what the carriers might be offering.
For the sake of accuracy while completing this exercise, it may help to refer to 'Words To Live By', a story we ran in the Careers section of highwaySTAR [Magazine] last November.
If a carrier is offering $1.05 a mile, then charging you a nickel a mile for insurance, two cents a mile for plates and two cents a mile for administration fees, then your net rate works out to only 96¢ per mile after those deductions. If another carrier offers a dollar a mile but with no deductions, then your base rate really is a buck a mile. Which carrier is offering the better deal? That one's pretty simple.
You'll find that there aren't vast differences in the base mileage rates in similar sectors of the industry. The real differences usually lie in the fine print. Hauling a flatdeck will often pay better than pin-to-pin dry van work, and the same may apply to tanks. The final call on where you choose to work may be more about lifestyle rather than purely dollars and cents. But either way, there's a choice to be made that will have an impact on your earnings.
If you operate a specific piece of equipment such as a wet line for a dump box or liquid product pump in a tank operation, you may incur a charge for the purchase and installation of the device. The upside is, you may earn more every time you use it.
Let's look at a few of the obvious offerings first, stuff you'll find in almost any recruiting ad.
Plates and Permits - paid base plate, U.S. heavy vehicle use tax and U.S. Customs decals, emissions testing, etc. The actual figures vary considerably across the country, but this bundle could easily cost you $5000. That works out to a nickel a mile on a 100,000-mile year. Do your own cost-per-mile calculations based on a reasonable annual mileage.
Mileage Calculations - the issue of hub miles versus charted miles versus practical miles is always a contentious one. Few companies pay off the hub, and most use some sort of routing/mileage software. The question is, which do they use and how comfortable are you with its accuracy? If the software is off by as little as 3%, that's 3000 miles in a 100,000-mile year, which would be $3000 or so. Here's where it pays to ask to see another owner-op's statements to verify the mileage paid on a variety of typical trips.
Picks and Drops - many carriers offer paid P & D, while some stipulate that the fees kick in only after the first drop. If most trips offer more than one pick or drop, you can make a little extra. Bear in mind that too much time spent waiting can really cut into the miles.
Fixed Fuel Prices - some carriers offer a fixed fuel price, others a discounted rate that's pegged to their discount with the fuel supplier. Often, there's an upcharge applied to the owner-op price, or a surcharge. Watch the difference, because the service charges may negate the discount completely. Tabulate the price including all service charges.
Tolls and Bridge Crossings - depending on the geographical orientation of the carrier's lanes, paid tolls may be a non-starter. If you only cross one bridge a week, then that's not much of a bonus. On the other hand, if you cross a bridge several times a day, paid bridge crossings are a real advantage.
Fuel Surcharges - this is a big concern these days and a source of tremendous confusion as well as a great deal of friction. You'll have to ask if the surcharge the carrier's offering is mileage-based or a percentage of the revenue. If it's based on mileage, does it apply to all miles, dispatched miles or only the miles run for certain shippers? If it's percentage-based, is it a percentage of the rate paid to the carrier or to the truck?
Above and Beyond
Some of the more progressive carriers are offering rather creative incentive programs, such as safety bonuses, profit sharing, reduced shop rates or even low-interest loans for equipment financing. Depending on your needs, these incentives can add up pretty quickly, and they can make a big difference at the end of the year.
Let's look at a profit-sharing plan that's tied to safety performance. If a carrier offers a 4% bonus/profit-sharing plan, that could mean up to 4% of your gross earnings, or about $4000 on a 100,000-mile year. Look at it another way, and it becomes an extra four cents a mile. A reduction on the interest rate on equipment financing of only 2% could mean an additional 2.5 cents per mile in your pocket rather than the bank's over a five-year financing term. That's $2500 a year.
If a carrier has its own maintenance facility and offers a reduced shop rate, there's money in that deal as well. They might charge you $50 an hour instead of the standard rate of somewhere around $75.00 in an outside shop. If the truck is a little long in the tooth, this could be a substantial saving.
Maybe the carrier is willing to throw in free use of the Qualcomm for personal e-mail, or perhaps they supply a company long-distance phone card. That's all money in your pocket as well, provided you can take advantage of the offer. Even the free use of a power wash for the tractor can help. At roughly $40 a shot on the street, you could then easily afford to keep the truck clean - and the DOT off yer donkey.
Don't forget to consider any up-front start-up costs such as painting, adding a pump or wet-line, or buying a side-kit with chains, straps and tarps. They're a one-time cost, but you could amortize them over a year or two of operation.
For the company driver, fuel, performance and safety bonuses can make a big difference at the end of the year. Bonuses can be misleading though, especially when the advertised mileage rate includes all the possible bonus earnings. Always ask the carrier what the base rate is, then decide if the bonuses will be gravy or a necessary element of your pay package. If the bonuses don't materialize, you may have to forego more than a camping trip.
We've laid it all out for you in this sample chart. Draw yourself a similar chart before you go for the interview and plot as many of the carrier's numbers as you can. Ask to see other driver's statements to verify the claims, and try to work everything into a 'typical trip' picture.
You'll need to use an average expected annual mileage to level the playing field, say 110,000 miles. Try to get the carrier to give you averages based on the performance of their current group of drivers or owner-ops. Add up all the annual costs, and subtract them from all the realistically possible annual earnings. Your final gross figure can then be translated into a revenue per mile figure for a final comparison. Keep it realistic and don't be fooled by pie-in-the-sky bonuses that are almost unachievable. Bottom line: do your homework!