What goes into the cost of one kilometre
The cost of a kilometre is the total of everything the truck costs to run, divided by the kilometres it drives. To make it useful, split the costs into two groups, because they behave differently.
- Variable costs grow with distance or with the trip: fuel, road tolls, tyres and maintenance per kilometre, and the driver's pay when it is paid per kilometre or as a per diem for days on the road.
- Fixed costs are there whether the truck moves or not: leasing or depreciation, insurance, vignettes and permits, parking, tachograph and tracker subscriptions, and a share of the office overhead.
- Overhead is the part people forget: dispatcher and accountant salaries, rent, software. It belongs to the trucks, so each truck carries a share.
The trip profit formula
Profit of a trip = revenue − the trip's own costs − the trip's share of the truck's fixed costs and overhead.
The trip's own costs are fuel, road tolls, the driver's pay and the other expenses that exist only because this trip happened. The share of fixed costs is what the truck costs for the days it was busy with this trip. Leave that last part out and every trip looks profitable, because you are only comparing the price with the fuel.
This is the same chain TAFI Agent follows: revenue minus fuel, road tolls, the driver's pay, the truck's fixed cost and overhead.
Fixed versus variable: how to spread fixed costs
Fixed costs have to be turned into a number you can put on a trip. There are two common ways, and the choice matters less than using one of them consistently.
- Per kilometre: divide the truck's fixed costs for the period by the kilometres driven in it. Simple, but it flatters trips with many kilometres and punishes short ones, and a truck that stands still drives the figure up.
- Per day: divide the fixed costs by the days in the period and charge each trip for the days it occupied the truck. This matches how the cost really arises, because a leased truck costs the same on a quiet day as on a busy one, and it makes waiting at a loading point visible.
- Whichever you choose, use the same period for costs and kilometres, and keep a full month or more, so one unusual week does not distort the rate.
Empty kilometres and the real cost per loaded kilometre
Empty kilometres are the ones driven without a paid load: driving to the loading point, repositioning, returning home. They burn fuel, wear tyres and may cost tolls, but no client pays for them directly.
That is why there are two figures. The cost per driven kilometre divides all costs by all kilometres. The cost per loaded kilometre divides the same costs by the loaded kilometres only, and it is always higher. The second one is what a quote has to cover, because the client is paying for the loaded distance.
A lane that looks fine at a price per loaded kilometre can lose money once the empty return is counted. If the truck usually comes back empty from a given region, that return is part of the cost of going there.
A worked example (hypothetical)
Hypothetical example with round numbers, not market averages. A truck loads at one point, delivers 800 km away, then drives 200 km empty to the next loading point. The trip occupies the truck for 3 days.
Revenue: 1,300 EUR.
- Fuel: 1,000 km × 0.32 EUR = 320 EUR
- Tyres and maintenance: 1,000 km × 0.08 EUR = 80 EUR
- Road tolls: 90 EUR
- Driver's pay and per diem: 200 EUR
- Variable costs in total: 320 + 80 + 90 + 200 = 690 EUR
- Fixed costs and overhead: 100 EUR per day × 3 days = 300 EUR
- Total cost of the trip: 690 + 300 = 990 EUR
Reading the result
Profit of the trip: 1,300 − 990 = 310 EUR, which is about 23.8% of revenue (310 ÷ 1,300).
Cost per driven kilometre: 990 ÷ 1,000 = 0.99 EUR. Cost per loaded kilometre: 990 ÷ 800 = 1.24 EUR (1.2375, rounded). The revenue per loaded kilometre is 1,300 ÷ 800 = 1.625 EUR. Anyone who compared 1.625 with the 0.99 would believe the margin is much larger than it is.
Two things stand out. First, the 23.8% is a profit after the truck's own fixed costs, not a margin over fuel. Over fuel, tolls and driver pay alone the trip would show 1,300 − 690 = 610 EUR, which is a very different impression.
Second, the 200 empty kilometres are paid for by the 800 loaded ones. If the same truck found a load for the return leg, the cost per loaded kilometre would fall towards the cost per driven kilometre. If the return stays empty, the quote for the outward leg has to carry it. This is the logic behind asking a client not only for a price per kilometre but also what the truck does afterwards.
Use your own numbers in the same layout: one line per cost, the days the truck was occupied, the loaded and empty kilometres. Once you can fill it in for a single trip, you can compare trips, routes and clients on the same basis.
Common mistakes
These are the errors that most often make a loss-making trip look profitable on paper.
- Forgetting the empty legs: counting only loaded kilometres in the cost, or only the loaded trip in the profit.
- Leaving out the driver's per diem, or counting the pay in one place and the per diem in none.
- Missing tolls, especially when the route crosses several countries, or treating vignettes as free because they were paid once a year.
- Ignoring fixed costs and overhead, so that the profit shown is really a margin over fuel.
- Averaging across very different routes: one cost per kilometre for a long international haul and for a short local run hides which of them pays. Group by route, vehicle or client instead.
- Using last year's figures. Fuel prices, tolls and wages change, so the rate must be recalculated regularly.
Why this is hard to keep in a spreadsheet
The formula is simple. The hard part is the data: fuel arrives from cards and receipts, tolls from several countries, the driver's pay from the payroll, empty kilometres from the GPS, and the revenue from the order. When each lives in a different file, the calculation is done once in a while, for a few trips, and usually after the money is gone.
How TAFI Agent covers it
TAFI Agent puts fuel, road tolls and the driver's pay next to the trip they belong to. The profit of a trip is revenue minus fuel, road tolls, the driver's pay, the truck's fixed cost and overhead, and trips are ranked from the most profitable to the loss-makers with an A–F grade. Profitability can be grouped by vehicle, driver, client and corridor. Read more about fuel, tolls and costs, the GPS tracking that records where the truck went, and the TMS that ties it to orders. See the full list of features, or book a demo and we will go through it with your own trips.