Fuel Expenses: How to keep hauling without sinking your business
As fuel prices rise year over year, it’s worth taking a deep dive into this major expense for owner operators.
Fuel prices have historically been outpacing the national inflation rate, and those costs are sure to take up a greater margin of your expenses. While fuel costs are factored into freight rates, it’s still an upfront cost for carriers that they will need to pay for before getting paid out on a load.
What happens if they don’t have the funds? A carrier would need to put this expensive purchase on credit, rely on a loan, or get a factoring company involved just to pay for fuel. What happens if a carrier cannot pay it off within a reasonable time? The debt accumulates and it can negatively impact their credit scores. The debt associated with fuel costs has actually made many trucking companies go bankrupt when they don’t receive their compensation in time.
Why should a carrier have to go bankrupt while trying to run a business? Sure, it can happen due to bad business practices. But the industry has typically relied on net payment terms that can see the carrier getting paid from 30 to even 120 days after taking a load. Without any assistance from banks or factoring companies, a carrier wouldn’t see the cash from their work until months after.
With rising fuel costs and long net payment terms, it’s no wonder that carrier companies are struggling.
For a truck with capacity to hold 200 gallons in their tanks, on average they could run 1300 miles before filling up again. For over the road trucking, that will most likely get them no more than one full trip. And with traveling so far, you don’t want to risk having to spend a ton of money just to get home, especially wasting miles and bobtailing all of the way back.
With intermodal, since it’s all local runs, you can take multiple loads before even needing to give your truck a refill. That’s multiple sources of income that can come in before heading back to the fuel station. Want to take 5 trips on one fill-up? It can definitely happen.
And if you’re using DrayNow, loads get paid out the week after they’re completed, so then you’ll really have the funds on hand to pay fuel expenses in full and stay debt free on that front. No one likes to pay for fuel, and not a single carrier wants to be reimbursed for their expenses weeks later, when they’re already on the next tank of fuel.
Fuel is already enough of an expense, and you shouldn’t have to worry whether you’ll make enough money with the number of miles you had to drive, or even having the funds in time to purchase. Go intermodal, stay local, and spend a lot less time at the fuel station.
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