Intermodal vs. over-the-road: Operating Expenses
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When it comes down to it, one of the most important things a trucking carrier needs to factor into their business is cost. As much money there is to be made moving freight, expenses have to factor into those rates. There can also be a major difference between the gross revenue a trucking company brings, and the net profit that they actually end up taking home. With fuel and equipment costs, as well as the rates a carrier can get for each mile driven, it’s worth breaking down all of these to make sure you’re making the right choice for your business.
With intermodal trucking, a carrier is going to see a higher rate per mile. Even though an OTR run may pay thousands of dollars, it will most likely see a lower rate per mile, plus a higher fuel expense and more wear and tear on the power only unit. The overall gross revenue of an over-the-road trip may be higher, but with all of the expenses and lower rates per mile coming into the equation, the take home pay is not at all close to what was originally seen.
With tractors still only averaging around 7 miles per gallon, it’s essential to not use a ton of fuel per trip in order to offset that cost. With longer runs seen in the OTR market, paying a hefty sum to keep the truck running is inevitable. It’s important for a carrier to budget how much fuel they are able to use, and therefore how far they are able to run before it’s no longer profitable, since trucking companies do go bankrupt over fuel costs.
Local intermodal loads, however, will definitely see less of a fuel cost per trip, while still getting high rates. Pick up multiple intermodal loads per week and a carrier could end up running the same mileage as an OTR driver but getting to stay close to home and making more money with those higher rates offsetting the fuel cost.
Another factor is the equipment used in each type of trucking. Many OTR drivers end up investing in a dry van and trailer in order to haul, which can pay off in the long run but also runs the risk of hurting their financial situation if they cannot make the money back quick enough. A brand new dry van may cost a carrier around $30,000 with monthly rentals usually running between $500-750 per month. On the other hand, with intermodal trucking, the drayage container and chassis are owned by the railyard, free of charge to use, saving the carrier money on that front as well. All the intermodal trucking carrier needs is their power only unit to haul this freight.
With intermodal, on top of the lower upfront cost, services like DrayNow directly pay carriers a week after their load is completed.
With the substantial initial investment a carrier may have to make for over-the-road trucking, they’re going to need to get paid quickly. Depending on who they are working with, they may not get paid until 30-60 days after the haul. This leads to many owner operators choosing to work with a factoring company, which pays them quickly but takes a percentage of their pay. With intermodal trucking, on top of the lower upfront cost, services like the DrayNow load board app can directly pay carriers a week after their load is completed. There’s no need for a carrier to go into debt or lose a cut of their revenue because they can’t get paid quickly.
The whole point here is that it is important to really dive into all of the expenses associated with trucking. With less mileage driven per trip and hopefully less maintenance expense combined with generally a higher average rate per mile, intermodal trucking is the more cost-effective choice for carriers. It may require a carrier to take more runs per week than over-the-road runs, but they’ll be closer to home and lessening the gap between their gross and net revenue.
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