Calculating The Real Delivery Costs In Your Rental Business: Trucks

I recently had a great conversation with one of our R.W. Elephant users who owns a specialty rental business. She is growing but is finding that delivery costs are eating into her profit.

This is so common for rental business. I think it is time we take a look together at the real cost of delivering that rental order you just booked.

Delivery Truck

First off, there’s the cost of the truck. Whether you are renting the truck, leasing, or own it, there is a real cost. It may be a monthly payment, a per-use fee, and even a charge for the miles you drive. Start by figuring out the actual cost of the truck you’re using. Be sure to include maintenance, registration, new tires, insurance, and all of the other costs that go along with having a truck to deliver with.

For the sake of an example, let’s say you own your truck (or are in the process of buying it) and the total cost (including interest over the life of the loan) is $40,000. Imagine that the truck will last 4 years and you plan to do 100 deliveries per year in that truck. The maintenance, registration, insurance, and other expenses come out to $6,000 more per year.

Cost of the truck: $40,000.

Cost of upkeep: $6,000/year x 4 years = $24,000

Total cost for 4 years = $64,000 / 4 years = $16,000 a year.

$16,000 / 100 deliveries a year = $160 per delivery.

Based on those numbers, we can calculate that the truck cost is approximately $160 per delivery. If you plan to do 200 deliveries per year or keep the truck for 6 years instead, your cost per delivery drops to $80 or $127 per delivery respectively.

On the other hand, if you rent a truck every time you have a delivery, you’ll want to gather those real numbers. Perhaps the cost of the truck is $60 per day plus $0.25 per mile and you have to pay an additional $15 per day for insurance. Your fixed cost will be $75 per day with variable costs of $0.25 per mile.

As we move forward with this example, let’s call our truck cost $80 per delivery. Yours may be higher or lower. That’s the number we’ll run with for now.

Hold on to these figures. We’ll come back to truck costs. In the next post, we’ll start to think about equipment costs.

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