Then and Now: A Cost Comparison
by Jim Park
Why is it that there always seems to be too much month left at the end of the money? Well, if you track the cost increases we've seen in the past 15 years, it's about as plain as the nose on your face. Costs creep up slowly for the most part, so the day-to-day increases aren't that obvious. But by comparing mid-1980s costs and rates to the present equivalents, it's easy to see how far behind we really have fallen.
The cost of a new truck with a typical owner-operator spec has risen substantially over the past 15 years. Bob Beveridge of Edmonton Kenworth pegs it at $76,000 in 1985. By 1990, it was almost $85,000. Come 1995, the price had reached $119,000, and today that typical spec, not too fancy but with a few extra amenities, will set you back about $131,000. An overall increase of 58%, or 4% for each of the past 15 years.
Here's something else to consider: back in the mid-1980s, you could get that brand new $76,000 truck for 36 monthly payments of $2020 each with a 20% downstroke of $15,200. Today's $131,000 truck would take 60 months to pay for, with a monthly bill of $2200 after a 20% downpayment of $26,200. Big increase, and we haven't considered trade-in value. After three years of tender loving care, the '85 might have retained two-thirds of its original value. But after five years, you'd be lucky to get half of what you paid for the 2000 model.
Shop rates haven't remained stagnant either. An hour of shop time in Edmonton was worth $46.00 in 1978. By 1983, the rate had climbed to $56.00, and in 1990 the price hit $68.50. Today? You're looking at $75.90 for an hour's worth of your mechanic's time. That's an increase of about 60% over 22 years.
But what's happened to freight rates and owner-operator pay? Exactly the opposite. Freight rates have been on a steady decline ever since deregulation opened the doors to unfettered competition, and the rate paid to Canada's owner-operators has remained essentially unchanged since the mid-1980s.
Beveridge described for us a particular run one of his customers once bragged about: a round-trip from Edmonton to Bakersfield, Ca., with peat moss down and various types of produce coming back. Five or six days work in the early 1980s paid, depending on the season, $4200. Today, Beveridge says, that same round trip pays just $2650.
Had owner-operators managed a very modest annual gain in haulage rates of 2% per year every year over the past 15 years, up from a buck a mile, they'd now be earning $1.34 per mile - a 34% increase over five years. Compare that to the price of a truck, up 58%, or the hourly shop rate, up 65%, and it's easy to see why the price of a litre of fuel has become such a lightning rod.
We also consulted a reputable load broker named Mike, who says that in the late 1980s he was paying more than $800 to move a tandem load from Toronto to Montreal. Today he can get it done for less than $400. "I recently had to move a time-sensitive partial load from Toronto to Dallas," he says. "I was prepared to pay an expediter around $2600, but some other guy was looking for a little top freight; he took it for $1000.
"You guys can be assured that as long as people are willing to work for nothing, the shippers are going to continue to pay nothing," Mike said. "They're having a field day at your expense, and it's all because you're afraid that the next guy will work cheaper than you will. Believe me, if you held firm on the price, the shippers would have no choice but to pay what you're asking."