A transport business rarely fails because the phone stopped ringing. It fails while the phone is ringing — because every load is priced on the one cost the operator can see, and paid for out of the ones they cannot. Fuel is visible. Tyres, servicing, insurance, licensing, the driver and the value draining out of the vehicle are not.
Why busy transporters run out of money
The pattern is consistent. A new operator quotes against what a trip costs in diesel, adds something for their time, and wins work because the number is competitive. It is competitive because it is incomplete.
The bill for everything else does not disappear — it just arrives later. A set of tyres, a major service, an insurance renewal, or the day the vehicle needs replacing. By then the rate has been established with the customer and is hard to move.
Running costs: what varies with distance
These scale with how far the vehicle goes:
- Fuel — the one everybody counts.
- Tyres — a consumable measured in kilometres, not years.
- Servicing and maintenance — scheduled work, plus the unscheduled.
- Wear on the vehicle itself — the reason a high-mileage truck is worth less than a low-mileage one.
- Tolls on the routes you actually run.
Standing costs: what you pay parked
These happen whether the vehicle turns a wheel or not:
- Insurance — vehicle, and cover for the goods you carry.
- Licensing and permits, including driver permits.
- Finance or lease repayments.
- A permanent driver salary, plus the statutory costs of employing them.
- Depreciation — the vehicle is worth less each month regardless.
- Your own admin time, which is a real cost even when it is unpaid.
Standing costs are why an idle vehicle is expensive. Utilisation is not a vanity metric in transport — it is the denominator that every standing cost gets divided by.
Working out your own cost per kilometre
Use your own numbers, not an industry average. A published rate-per-kilometre is somebody else's vehicle, route, load and finance deal.
- Take a full year of standing costs — insurance, licensing, finance, driver, and a realistic depreciation figure.
- Divide that by the kilometres you realistically expect to run in a year. Be honest: use last year's actual distance, not your best month × 12.
- Work out your running cost per kilometre — fuel consumption at your real average, plus tyres and servicing spread over the kilometres they last.
- Add the two together. That is your cost per kilometre, and it is the floor below which work makes you poorer.
- Add your margin on top. Margin is what the business runs on and what replaces the vehicle — it is not profit you can spend.
The empty return leg
A vehicle that delivers 300 km away and comes back empty has run 600 km. The return burns fuel, wears tyres, and uses the driver's day. If your quote covers only the loaded distance, you have handed the customer the return trip for nothing.
Price the round trip unless you have genuinely secured a backload — and treat a backload as a bonus that improves the job, not as an assumption that justifies a lower rate before you have one.
Turning a cost into a rate
Once you know your floor, quoting becomes a decision rather than a guess. You can take work below your usual margin deliberately — to fill a return leg, to open an account — and know exactly what it is costing you. What you can no longer do is take it by accident.
It also lets you walk away. The most valuable thing about knowing your number is being able to say no to a rate that is beneath it, while a competitor says yes and finds out later.
Frequently asked questions
- Why can I not just price off fuel?
- Because fuel is the only cost that announces itself. Tyres wear out, services come due, the vehicle loses value, the licence and insurance renew, and the driver is paid whether the load was priced correctly or not. A rate that covers fuel and a little more feels profitable and is not.
- What is the difference between running and standing costs?
- Running costs vary with distance - fuel, tyres, servicing, wear. Standing costs happen whether the vehicle moves or not - insurance, licensing, finance repayments, and the salary of a permanent driver. Both have to be recovered, but only one of them scales with the trip.
- How do I handle the empty return leg?
- Cost it. The vehicle burns fuel, wears tyres and consumes hours coming back whether or not it is loaded. If you quote only the loaded distance, you are giving away the return trip and calling it competitiveness.
- My competitor charges less. Are they cheaper than me?
- Or they have not worked this out either. Undercutting on a rate that does not cover standing costs is common, and it ends the same way for whoever does it. Knowing your own floor lets you decline work confidently instead of winning it expensively.
Next steps
Knowing your rate is one half. The other is keeping the vehicle on the road and the load covered — read what actually stops a vehicle, or take the free readiness check.