Saturday, November 28, 2009

(E)mail bag #2

What kind of truck do you drive?

I drive a white 2007 Volvo 780 tractor with a 2006 Volvo D12 engine and a 13-speed manual transmission. The truck was built in October of 2006 and sat at a dealer lot until June of 2008 when I started driving it. It started with 1,337 miles on the odometer and as of this writing has just over 210,000.

The things I love about my Volvo include its very tight turning radius, huge and well-organized interior (the lower berth converts into a table with two seats like an RV), the largest refrigerator of any non-custom truck and a very, very fuel efficient engine and aerodynamic combination which gives me great fuel economy.

How do you calculate fuel economy?

The only way to truly determine fuel economy is to take the actual fuel expense (what you pay at the pump) and divide it by the miles driven. Since there is always some amount left in the tanks from week-to-week, you need to do this over time, such as a month or a quarter.

Since I am paid the fuel surcharge amount determined by the Department of Energy each week for every mile I'm dispatched, I also include that in the calculation:

(Fuel expense - FSC) / Miles driven = Adjusted fuel cost

Purists could note that I lump together my company discount at the pump into the fuel expense, and they would be correct. Its just that I'm too lazy to break it out and it doesn't effect my end cost as calculated.

How can you stand driving at 60 MPH?

It was real easy for me once I did the numbers and decided how I would make money in this profession.

The only large variable expenses you have as an owner-operator are your pay and the money you spend on fuel. In order to maximize my pay, I have to reduce my fuel expense. Think of it like a teeter-totter: the more you pay for fuel, the less you pay yourself and vice versa.

One of the checks I make of my progress is to determine what my CPM pay is. As a company driver, I think it is reasonable to expect somewhere in the low 40's per mile with the right company and experience. Since I take on additional risk and work as an independent, my goal is to consistently achieve over 50 CPM net pay after all truck expenses (excluding my personal taxes and the costs of vacation time, health care and the like that company drivers enjoy). With 133,303 paid miles in my first year my net was $67,740, which is a 50.8 CPM.

I achieved this with an adjusted fuel expense of 11.73 CPM. If my fuel expense was just 20 CPM (which is a truck getting 6 MPG with zero out-of-route miles and zero idle time), my net pay would be merely 42 CPM, or what I could expect to make with much less exposure as a company driver.

That's why I drive 60.