PAY

[merrick4]

OK Merrick, with Rambler's help, I think I understand. You've got a low/no interest loan on the equipment and you didn't have to put any money down is that it? Sweet deal that.

Sure, when you pay it off you have the assets....whatever it's worth. I find if you ammortize the equipment over a timeframe that you can afford (i.e payment size), it's pretty much worn out when you're done so your asset isn't all that much.

The exception to that may be trailers.....which is probably why companies like Landstar will rent you a trailer but they won't rent you a truck.

Actually I play the credit card game so that's how I did that. Actually this here www.fatwallet.com/t/52/632935/ explains it all.

You are probably right about the worth of this truck when I'm done with it. You know I paid I think 8 or 9 thousand for my car and every year that goes by (about 5 and 1/2 years now) I think how much this car has really cost me per year and obviously the longer I keep it it was smarter and smarter to buy it and keep it. The guy I'm working with trades in the trucks every 3 years and somehow he said (and I don't doubt him) he doesn't lose out as much as trucks keep their worth until 500k miles(I think that's the number he used) I wonder really how true it is?

[geomon]

Ridge Runner and Dispatch_This are looking at this as a business that needs to stand on it's own two feet no matter where the cash to acquire the equipment comes from.

I agree with both of them in terms of truly looking at the cost of the business....if you pay cash (you're the banker) or borrow the money (they're the banker) that money is being invested and you should be able get back the amount you invested PLUS interest when you sell the asset. You are certain that the bank is doing that...why shouldn't you?

Add to your business plan your ROI (return on investment) on the money you invest in the business whether it is an all cash payment for the truck-trailer or a partial investment. It should be a "cost". Compare it to leaving that money in a bond or mutual fund. I know there is the "freedom-bemyownboss" stuff but you need to know how much your paying (or not) for that freedom.

So I agree 100% with you both...that is the way to look at your business.


What Dispatch_This wrote:

How to determine your true truck cost.

What you pay for your truck MINUS what you eventually sell it for, MINUS what the money would have earned if you put it in a safe investment.

Let's assume you pay $50,000 cash for a 2004 Pete, and have decided to sell it in five years no matter what, and get out of the trucking business.

2012 comes along, the wholesale value of your truck is $25,000. Your actual truck cost was $25,000 for five years. If you drove 500,000 miles during that time, than that would be .05/mile.

But wait - If you had put the $50,000 in a money market account at 5% you would still have the whole $50K plus about $14,000 in interest for a total of $64,000.

So your truck cost was 25,000 plus 14,000 for $39,000, or .078/mile.

[Ridge Runner]

Ridge Runner and Dispatch_This are looking at this as a business that needs to stand on it's own two feet no matter where the cash to acquire the equipment comes from.

I agree with both of them in terms of truly looking at the cost of the business....if you pay cash (you're the banker) or borrow the money (they're the banker) that money is being invested and you should be able get back the amount you invested PLUS interest when you sell the asset. You are certain that the bank is doing that...why shouldn't you?

Add to your business plan your ROI (return on investment) on the money you invest in the business whether it is an all cash payment for the truck-trailer or a partial investment. It should be a "cost". Compare it to leaving that money in a bond or mutual fund. I know there is the "freedom-bemyownboss" stuff but you need to know how much your paying (or not) for that freedom.

So I agree 100% with you both...that is the way to look at your business.


What Dispatch_This wrote:

How to determine your true truck cost.

What you pay for your truck MINUS what you eventually sell it for, MINUS what the money would have earned if you put it in a safe investment.

Let's assume you pay $50,000 cash for a 2004 Pete, and have decided to sell it in five years no matter what, and get out of the trucking business.

2012 comes along, the wholesale value of your truck is $25,000. Your actual truck cost was $25,000 for five years. If you drove 500,000 miles during that time, than that would be .05/mile.

But wait - If you had put the $50,000 in a money market account at 5% you would still have the whole $50K plus about $14,000 in interest for a total of $64,000.

So your truck cost was 25,000 plus 14,000 for $39,000, or .078/mile.

Finally!!! Someone gets it!!!!

[RostyC]

I agree with everyone above, you still have to count the money you put out towards your expenses. If Steve put out 40,000 he should make payments back to himself for the next 4 or 5 years, with interest.

I talked to my accountant before I bought my truck a couple weeks ago, because I wanted to know the best way to go about it. I had two options pay for it, out of my existing business account, or my personal line of credit.

As per our conversation he advised me to pay for it with my personal line of credit, even though I'll pay that back with bonuses from my business. Then when I'm ready to put the truck to work, I'll set up the company and it will start to pay me back for the truck with interest if I want to do that. (I hope I pass my credit check ) It doesn't matter how much time elapses till I start to work it either.

Another thing, when the business starts to pay me back the truck will get depreciated over 5 years and that includes the interest if I charge myself any.

Now, here's something else you guys can think about, if you pay cash and charge yourself interest should it be high or low interest?

I didn't get that far with my accountant so I don't know. Also, I freely admit that I'm not the sharpest knife in the drawer, so I like to see what some of you might say.

[furbis]

when paying cash for a truck in the example the loss of 5% interest was used I also think you need to figure in that you are not borrowing from a bank that would charge 9% or 10% so it could be said that by paying cash you are still making 4% on your money.

[solo379]

when paying cash for a truck in the example the loss of 5% interest was used I also think you need to figure in that you are not borrowing from a bank that would charge 9% or 10% so it could be said that by paying cash you are still making 4% on your money.

Please don't forget, that those 9-10%, is tax deductible, so you get about 1/3 of it back! :wink:

[Truckdobe]

I would like to thank all of you for your comments and opinions, it has been very informative to say the least.
For what it's worth my Brother inlaw says his cost per mile is .60 pm.
I still have a month or so to make up my mind, I will talk with him and try to get a good idea of what his net is on average. He's been driving
for thirty years and he has been with his present company for the last
eight. He pretty much runs the same area every week so he should be
able to give me a accurate estimate as to what I will be making.
Thanks again.

I'd like to see the breakdown on a cost per mile of .60.

I pay myself .50 cpm + benefits (health ins, retirement). Why run the risk of ownership if I can't make as much as I could in a co. truck?

Fuel, I'll be generous and say that he's getting 7.5 mpg @ an avg of 2.75 per gallon; would be .37 cpm.

Then there's:

Administrative fees
Banking fees
Communication - internet access...
Dues & Subscriptions
Fuel & Oil
Insurance
-Health
-Physical damage
-Cargo
-Liability
-Disability (long and short term)
-workman's comp or occ/acc
License plate
Permits
Physicals & drug tests
Motels
Office supplies
Office equipment - cell phone, pager, laptop....
Parts
Postage
Professional fees
Repairs & maintenance
Salaries
Supplies
Taxes
-2290
-IFTA
Telephone
Tires
Tolls/Scales/Prepass
Tools
Parking
Washes & Lubes


Not a complete list, but most of it is there. I realize that some leased O/Os may not pay all of this, but most.

Please tell me how to do all of this on .60 cpm without driving junk and not maintaining it, then pay myself and make a profit (which I figure into my cost per mile, it's under Salaries and should be included, though many don't).

[Truckdobe]

...on paying cash... we have, for the last 2 out of 3 trucks and trailers, the other would have taken a 14-16 mos to pay for if we had kept it; or we could have written the check, but didn't want to; that truck was $200k.

The trick is to pay yourself the truck payment when you don't have it. I pay a truck payment of $2500 per month every month and have for years, although I owe nothing on my truck or trailer and likely never will since I've been paying one into an investment acct instead of a bank or finance company for over 7 years.

[Truckdobe]

My cost per mile last year was $1.03 plus wages & benefits, equaling another .60 cpm. That's .50 cpm wages, plus health insurance and 2 fully funded ROTH IRAs. And yes, there was profit above that.

[geomon]

RostyC....glad to hear you bought a truck. What did you end up with? Pictures???

Truckdobe...those are all typical business costs that you listed. I suppose most people simply don't account for that in their business so have no idea of their true costs. And like gman alwasys says....are slowly running themselves out of business. For Truckdobe, $1.03 + $.60 (wage/bennies) = $1.63 so that is the breakeven point for running the business at cost or profit.

Of course each person's situation and costs and totals will be different but people; you should be adding all these into your business plan to make sure you end up in the black and not the red 8)

[Joymax_Trans2]

Finally, there are few who understand Accounting 101 & Business 101.

[Dispatch_This]

Distpach:
You're correct I didn't show the equipment as assets. reason? It's neglible. A 2001 T2000 with 1 million on the clock is practically worthless. Might be worth 15,000 and 5 years ago we paid $115,000. So I beg to differ...what you pay for the truck can be a BIG part of the picture. It just depends. We overpaid for that truck.

rank- Well, $15,000 dollars is nothing to sneeze at...

According to your numbers, you recouped your entire investment in 2006 based on $23,000 a year. So now your free-rolling.

If I were in the same position, I would be looking at my P & L next January and asking, "What has my net before tax profit been on that truck over the last 6 years, and if I add $15,000 to that amount is it more than what I would have earned in a money market account?

Not trying to single you out , rank. Your numbers look pretty accurate and they make a good example!

[merrick4]

RostyC....glad to hear you bought a truck. What did you end up with? Pictures???

Truckdobe...those are all typical business costs that you listed. I suppose most people simply don't account for that in their business so have no idea of their true costs. And like gman alwasys says....are slowly running themselves out of business. For Truckdobe, $1.03 + $.60 (wage/bennies) = $1.63 so that is the breakeven point for running the business at cost or profit.

Of course each person's situation and costs and totals will be different but people; you should be adding all these into your business plan to make sure you end up in the black and not the red 8)

You know I account for all of that. I have it all entered into Quickbooks but as I'm only out here 2 months, how do you guys break it down per mile? I don't know how many miles I am going to run this year. I'd like to know my operating costs though.

[rank]

rank- Well, $15,000 dollars is nothing to sneeze at...

Don't get me wrong...I'd rather have it than not have it. But if you add it back into the equation on the plus side, it lowers my cpm by less than a penny a mile.

According to your numbers, you recouped your entire investment in 2006 based on $23,000 a year. So now your free-rolling.

That truck was paid for years ago. When I "ammortize", I estimate the # of years that we are likely to have the truck and use that as the ammortization period. That T2 has a 475 Cat that seems lazy as a pig and everything is shaking like crazy....we'll probably trade it soon on something else (NOT a $120,000 truck if I have my way).

If I were in the same position, I would be looking at my P & L next January and asking, "What has my net before tax profit been on that truck over the last 6 years,

I've never done that simply because the convenience factor of having our own trucks outweighs any savings that may come rom using an outside carrier. But, for giggles, and to hold myself up for riducule by the esteemed members of the board, I'll make an (weak)attempt.

I estimate what I would've paid an outside carrier $900,000 to run 300,000 loaded miles in 6 years......so we saved $900,000.

The truck cost $100,000 (after deducting the $15,000 present value). Add in $40,000 for mait (it was only a year old when we got it)+ $200,000 for driver + $350,000 for fuel + $60,000 for ins = $700,000. So the $100,000 truck made approx $200,000 over 5 years.

Not trying to single you out , rank. Your numbers look pretty accurate and they make a good example!

Single away. It bothers me not.

[rank]

how do you guys break it down per mile? I don't know how many miles I am going to run this year. I'd like to know my operating costs though.

I use my IFTA miles but you'll need to estimate. If your cm is too high, just run more miles.
8)

[RostyC]

RostyC....glad to hear you bought a truck. What did you end up with? Pictures???

It's going through inspection now geomon, then to a shop for service, I'll post pics as soon as I can. I never take pics of my trucks without at least two coats of wax.

[Truckdobe]

[quote="merrick4

You know I account for all of that. I have it all entered into Quickbooks but as I'm only out here 2 months, how do you guys break it down per mile? I don't know how many miles I am going to run this year. I'd like to know my operating costs though.[/quote]


Mine (cpm) fluctuates from year to year and last year was a bit high b/c I was doing some major rebuilding before, stupidly, deciding to buy a new truck... I know my averages from years past and have a pretty good range to work with.

If you only have 2 months, it would be hard to get a good look at a full year b/c of seasonal fluctuations, holidays etc... It is a start, particularly if your freight doesn't fluctuate greatly.

[geomon]

I never take pics of my trucks without at least two coats of wax.

...got ta git her looking purty before having her shake a leg at us eh :P

[GMAN]

You know I account for all of that. I have it all entered into Quickbooks but as I'm only out here 2 months, how do you guys break it down per mile? I don't know how many miles I am going to run this year. I'd like to know my operating costs though.

You won't be able to be entire accurate in your operating costs, but you can certainly calculate your current operating costs. You will have a much better picture after a full year of operating. Right now, you have 2 months of operating costs. At least it is a start. Just take all of your expenses, deduct from your total revenue and divide by the total miles you have driven. I prefer using odometer miles. You should have written down your initial odometer reading when you bought the truck. You can look at it now and see exactly how many miles you have driven. If you do this each month for a while, you will begin to get a better picture of your actual costs.

[RostyC]

I never take pics of my trucks without at least two coats of wax.

...got ta git her looking purty before having her shake a leg at us eh :P

LMAO.......yep gotta be purrty!