Whether it’s an independent owner-operator trucker or a huge logistics company, one single number is the key to trucking. Cost per mile (CPM) is the total cost of operating a truck divided by the total miles driven. For owner-operators and small fleets, CPM is the single most important profitability metric because it determines whether a load makes money or loses money. Without understanding the cost per mile to move a load, a trucker is at the mercy of shippers, brokers, or trucking companies.
Cost per mile isn’t just a number. It’s an indicator and a guide. Without a clear understanding of a truck’s CPM, the owner doesn’t know if the load makes money or loses it. No trucking business can succeed if the cost to haul freight is $2.50 per mile, but the pay is $2.00 per mile.
Some truckers have decided to solve this problem by charging a flat minimum for a regular load. Was the flat rate decided after mathematical analysis of the business or was it just a guess that sounded good?
Cost per mile is a metric for choosing loads and also sets a goal to reduce CPM to make the company more efficient and profitable.
What Is Cost Per Mile?
Cost per mile refers to the cost to move a truck one mile down the road. It’s a formula takes the total expenses and divides that number by the total miles driven. It sounds very simple to calculate.
CPM starts with “cost,” so it’s obviously a financial number. Expenses appear to be obvious. One look at the checkbook, credit cards, and receipts will provide all the expense information. The tracked miles for IFTA will provide the mileage count.
However, this simple formula depends on dozens of numbers. Mileage changes month to month. Some expenses may need to be adjusted for a specific time period. Others may show up during some trips but not others.
Then there are expenses that show up regularly but are completely random amounts, such as taxes or apportioned license plates.
If there’s one month that truckers hate, it’s April. Three tax bills fall due in April:
✅IFTA
✅Personal income tax
✅Corporate income tax.
This one month has significant expenses, probably greatly in excess of a trucker’s monthly income. Trying to determine cost per mile based in April is like trying to replace a trailer’s inside tire in a snowstorm. Sure, it can be done, but who wants to do it?
Or any month when expected or emergency maintenance repairs push expenses up, which might only happen occasionally, will change the cost per mile.
Therefore, calculating a truck’s cost per mile might seem easy, but many factors influence it. Breaking down the categories helps wrangle those numbers. Accountants use two categories: Fixed and Variable.
Fixed Costs and Operational Expenses Included in CPM
Fixed costs are paid whether or not the truck is on the road. Some payments are monthly, such as loan repayments, insurance, software subscriptions, and ELD fees. Accountants or bookkeepers may be fixed expenses if the company uses those services regularly.
These are operational expenses – the cost of doing business. A trucking company must have office equipment, insurance, bonds, licenses, and cellphones. Other expenses such as loan or lease payments, load board subscriptions, trucking management software, and retirement contributions are also fixed expenses.
Savings are too often overlooked in the fixed costs. Unless a trucker has enough in the bank to cover major repairs, they run the risk of bankrupting their trucking business. This amount takes time to save.
Fixed Expenses
Truck and Trailer leases or payment
Permits and Licenses
Insurance – business, vehicle, medical
Professional Services – accountant, bookkeeper, mechanic
Software and Internet – trucking management software, ELD, load board subscriptions,
Savings – retirement, maintenance, vehicle replacements, business development
Truck maintenance can cost money regularly, but it may be inconsistent month to month. Many maintenance tasks aren’t based on time but on mileage. More miles mean more expenses. Tires and brake maintenance, for example, will require more service. But because these expenses can be planned and even scheduled, they can function as fixed expenses.
The trick is figuring out how to convert a yearly or weekly payment into the right time frame.
Converting Time Frames
How are weekly, quarterly, and annual expenses converted to monthly figures?
✅Dividing annual payments by 12 will give a number to use for a monthly CPM.
✅Dividing quarterly payments by 3 will produce a monthly amount.
✅Multiplying a weekly fee by 4 to find the monthly amount.
A computer can handle the math. The driver has to provide the numbers – but the work will pay for itself when a load board posting looks promising but ultimately will cost more to haul than it will pay. That’s the end goal – to avoid the loads that cost money to haul instead of paying the trucker for their time and work.
PRO TIP: Since fixed expenses do not change frequently, a monthly Fixed Cost Per Mile number can reduce calculation time if using a spreadsheet. Make sure that old data is properly archived with dated files or make a fresh copy of the file for each month’s calculation.
That’s a good question and probably why many truckers don’t bother. Finding the CPM requires some serious time in a chair – not a driver’s seat – to find a number that will change the next time fuel prices go up.
Prices rarely drop significantly. So the variable expenses go up and up. Then the profit margin for a load a trucker would bid on could disappear. Without having current CPM information, a load could end up costing the trucker money.
When a trucker has a regular lane, expenses can be easy to estimate. Guesses are based on experience:
✅which truck stop has the best prices (and coffee)
✅how much the tolls might cost
✅what accessorial fees can be expected.
However, many truckers don’t have regular loads. While regional truckers will know the interstates and even some state routes, the trucker who depends on load boards and brokers might never get the same load twice. They can’t make an educated estimate.
Variable expenses can wreak havoc on a trucking company’s finances. The practice of throwing receipts into a shoebox or the cab compartment, expecting the bookkeeper to make sense of them later, is a mistake. Total trucking management software packages will connect receipts, dispatch records, and fuel purchases directly to a load, streamlining billing and expense tracking.
PRO TIP: Use an expense management tool to keep receipts organized. Some trucking management software programs allow automated upload of receipts with a cell phone camera. Make a habit of uploading receipts before they end up in an envelope or accidentally fall into a puddle at a fuel pump.
Fuel Cost and IFTA
If there is one bane for the transportation industry, it’s the fluctuating cost of fuel. Add to that the inconsistent nature of freight hauling, and the variable costs for a cost per mile calculation complicate everything.
Add to that the differences in fuel taxes in different states, and suddenly variable expenses aren’t just unpredictable, they are a roller coaster. Truckers don’t have much choice when it’s time to fill up the tanks. Some truckers plan their fuel purchases in states with lower taxes but end up with a higher IFTA. Others try to buy fuel in every jurisdiction to keep their IFTA payment low.
Deadhead miles are counted in the total mileage for the CPM, just like they are for IFTA.
But the quarterly IFTA payment must be made. Like maintenance management, the more a trucker drives, the higher the IFTA tax bill goes. Trying to factor the four payments per year into a cost per mile is not easy.
PRO TIP: Calculate IFTA weekly with a trucking management software program that integrates with an ELD (Elog). This combination will produce the most accurate miles-per-state data. A program with up-to-date tax rates can use that data to show the current IFTA balance. Set that amount aside to pay IFTA without straining the budget or the credit card.
When To Calculate Cost Per Mile
In simplistic terms, a trucker adds all expenses for a specific time period. Then that total is divided by the total number of miles driven in the same time frame.
As with a mortgage, it’s better to use a computer with a preprogrammed formula rather than spending hours working it out every month.
There are entire spreadsheets designed for truckers to compute that number once they enter all the data into the form. Some trucking management software programs will compute it using all the data entered with the load dispatch, expenses, and invoices.
How Often to Compute CPM?
It’s important to decide what amount of time to use for the CPM calculation.
What’s the right amount of time to compute a reasonable CPM? A week? Two weeks? A month? A quarter? A year?
Once a week may be too frequent. A great week with ideal loads might make a weekly CPM look perfect. The next week, when tires are replaced and tolls push expenses up, the CPM will make a trucker consider leaving the industry.
While an annual CPM provides historical information, it doesn’t account for last week’s fuel price jump.
An ideal time frame for the cost per mile is one month. Because the CPM is subject to unexpected expenses or an exorbitant rise in fuel prices, a week is barely enough time to collect and analyze adequate data. While a weekly CPM may indicate costs going out of control, a regular examination of daily expenses might serve the same purpose. Fuel purchases may not be the best indicator of the engine’s condition. Fuel consumption is a better metric.
A monthly CPM is a good base. Seasonal changes and fuel price fluctuations are averaged out over a month. One major repair can be evened out by weeks of regular loads.
PRO TIP: Rolling CPM Explained A rolling CPM doesn’t limit the computations to a specific calendar month. Instead, it calculates the CPM based on the most recent data. A monthly CPM will report on a specific month. A rolling CPM based on the last 30 days may include numbers from the previous month. The rolling CPM reflects the current fuel price, which may be higher or lower.
Graphed CPM for Annual Reports
When tracking the cost per mile month to month, a visual representation can be helpful. An unexpected rise due to maintenance is easily identified as a blip that evens out the next month. A graph will also indicate potential mechanical problems, unrecognized expense increases, or how load decisions impact a trucking business. An annual CPM report and graph can lead to changes in how the company runs. Looking at the long-term numbers gives a clear view of the consequences of choosing loads that don’t cover their costs. Instead of focusing on whatever loads come up on the load board, the company may choose to focus on regional freight or develop local shipper relationships to reduce deadhead miles.
By using an annual graph, the trucking company can see when major expenses are incurred to prepare for the coming year. Instead of a guess, planning for the quarterly IFTA payments, anticipating a rise in rates in December, or saving for tire replacements becomes part of the business model.
Often, the question of how many deadhead miles are between one delivery and the next pickup determines the value of a load. Because deadhead miles are counted in the CPM but produce no profit, many truckers have an arbitrary number of miles or time on the road they find acceptable.
Other truckers are willing to take a load with the expectation that the profits will cover the losses of a return trip that doesn’t cover the CPM. They average the trip as a whole, not examining the trip as distinct parts.
For example, a trucker might have a choice between a load from Canton, Ohio to Chicago, Illinois, or a load from Columbus, Ohio to central Florida. Both loads pay the same per mile, but there are several factors to consider:
TRIP A: The trip from Ohio to Illinois is a one-day drive on relatively flat Midwestern interstates with tolls. Finding a backhaul from the Chicago area is fairly easy. That will keep the deadhead miles down.
TRIP B: The trip from Ohio to Florida will go through mountainous terrain, which reduces the miles per gallon. The round trip takes five days. Backhaul loads will require significant deadhead miles to reach.
While a trucker will use the same CPM for either load, they consider that the longer trip will put more wear and tear on the vehicle, may result in poorer fuel mileage, and increase living expenses on the road. The profit for one load may differ from the other once the numbers are examined.
By averaging the entire trip, hauling a load at less than the CPM for one part of the return trip will not be ideal, but it’s better than deadheading all the way back to Ohio.
Comparison of Two Trips (numbers are estimated for this example)
Trip A: Ohio to Chicago, IL
Trip B: Ohio to Florida
Total Loaded Miles
830
1,495
Total Deadhead Miles
122
742
Total Trip Miles
952
2,237
Gross Load Revenue
$1,767.00
$3,210.00
Variable costs: fuel tolls meals (3/day)
fuel cost: est: $370 tolls: $332.00 meals: $80.00
fuel cost: est: $1,007.00 tolls: $0.00 meals: $400.00
Total Trip Cost
$473.00
$1407.00
Net Revenue per Trip (estimate)
$1,294 for 1 day
$1,803 for 5 days
Profit per Mile
$1.36
$1.44
When the numbers are crunched, some decisions are easier to make. A five-day trip might look more profitable and the profits look good – but it’s a week on the road. Having a one-day trip leaves 4 more business days to haul more freight.
Cost Per Mile and Maintenance
While the assumption is that CPM only affects load choices, the data can have far more impact.
The condition of a rig or equipment is often seen in the dollars, not in the miles.
A rising cost per mile because an engine is failing might not be obvious until it gives out on the highway. The CPM reflects the maintenance costs that may be overlooked.
A particular trailer might have looked like a good purchase at one time, but analysis shows that the cost per mile is too high.
While some truck equipment is scheduled for service or replacement based on time, early indicators in the CPM may suggest early attention is necessary.
As a truck ages, the costs to keep it running may grow slowly. Taking a look at the CPM over time could show when saving for new equipment should take priority.
For a trucker who wants to stay on the road long term, maintenance and vehicle replacement aren’t a pipe dream; they’re a constant reality. Sometimes it’s a matter of saving and sometimes it’s a matter of applying for a loan. Having the insights the CPM provides, along with other statistics about its trucking business, can help make the best financial decisions for the company.
Common CPM Mistakes
A few common mistakes that owner-operators might make when computing their cost per mile:
Not including deadhead miles in the calculation. Nothing distorts the CPM more than ignoring empty miles. Perhaps the overall percentage of empty miles doesn’t seem significant, but the final number won’t reflect the true cost per mile. This can lead to underbidding loads and taking a loss.
Ignoring fixed costs outside the cab. The cost of running the business must be included in the per-mile cost. Ignoring the fixed costs that maintain the back office means the price of the support systems, such as trucking management software or licenses, aren’t considered in the formula. But those expenses are as necessary as fuel to keep the business working legally and financially.
Failing to pay the driver – even when it’s the owner. If a trucking company isn’t paying the drivers, it’s failing at the basic level to meet its obligations. The purpose of any business is to make money. Truckers don’t deliver freight for free and deserve to be paid a fair wage. When that wage isn’t included in the CPM, the largest expense has been excluded.
CPM FAQs
Is the CPM a goal or a metric?
It’s both. Taking care of your rig and expenses to keep your CPM down is a goal for any independent trucker. It’s also a metric that can indicate potential problems in and out of the cab.
Why is the CPM important for my trucking business?
A truck’s CPM is the clearest indicator of the business’s health.
A high CPM shows cuts are necessary or the load selection process isn’t working.
Rates per mile that aren’t covering the cost per mile are losing money for the trucking business.
What about unexpected expenses?
Unexpected expenses such as on-the-road emergencies can distort the CPM but without the wheels moving, there’s no business. These expenses show where the trucker needs to pay more attention to maintenance. Establishing a regular savings program to build up a reserve to cover expenses and scheduling regular maintenance with trusted technicians to prevent emergencies can reduce the crises and their excessive costs.
How often should I look at my CPM?
Looking at your CPM should be a regular habit before you look for a load on a load board or talking to a broker. That number must be at the forefront of anyone’s mind as they negotiate for a load.
Some trucking management software programs compute a current CPM on demand. Other spreadsheets require a chunk of time to enter all the necessary numbers. Either way, a monthly check of the CPM gives the trucker a consistent view of the business’s state.
How can I lower my CPM?
Two obvious ways to lower your truck’s CPM are to improve fuel efficiency and optimize routes. Keeping the engine in the best possible condition, maintaining tires, and reducing idle time will improve fuel usage. Using trucking dispatch software and truck-friendly routing will keep mileage down as well as finding backhaul loads that don’t include excessive deadhead miles.
One often overlooked part of controlling the CPM is proactive maintenance. Keeping up with scheduled maintenance (by mileage or by time) can prevent on-the-road emergencies that destroy profits.
A consistent review of fixed expenses may find new ways to reduce them. Using an ELD that does not have extra bells and whistles the trucker doesn’t need may cut the cost. Trucking management software that handles accounting may eliminate the need for a bookkeeper or an accountant.
I’m a rookie driver for a trucking company. Do I need to pay attention to my CPM when the trucking company pays most of my expenses?
First, welcome to the world of trucking! Starting a trucking career as a driver is smart.
You’ve made a good choice to start out on the road by learning the ropes on someone else’s dime. You’ll learn the tricks and traps of the job during this first year and may decide that you’d like to become an owner-operator.
While you’re driving for someone else, take this opportunity to learn the business of trucking. You may not be paying those fixed costs or need to compute IFTA, but those are necessary for a self-employed trucker. Use the data from your trips and experiences to figure out the costs of doing business. When you become an independent driver, all of those tasks fall on your shoulders the minute you get your trucking authority. By practicing good business habits and discovering your potential CPM, you’ll know what you’re in for when you take the keys to your first vehicle.
TruckingOffice PRO and CPM
Cost per mile is more than a bookkeeping number. It’s the key to a successful trucking business. It’s the route to a profitable career on the road. When an independent owner-operator understands CPM, they can choose better loads, plan for maintenance, and structure their finances to cover expected and unexpected expenses. Whether you’re an owner-operator or a company driver dreaming about your own rig, knowing your CPM gives you the power and knowledge to make the best business decisions every mile of your journey.
TruckingOffice PRO was designed with the small trucking business owner-operator in mind. Our comprehensive trucking management software covers everything from dispatch to invoicing, maintenance scheduling and records, and provides Trucker Stats™ – the tools you need to analyze your trucking business, including your CPM. Integrated with TruckingOffice ELD, you won’t find a better combination for your trucking company.
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