First and foremost, consider your health and your family’s health before deciding to run during the pandemic. If you feel unsafe or are in a high-risk health group, then it likely makes sense for you to stay home. However, in terms of trucking, the current environment is similar to an extended Christmas Holiday season. If you are able and willing to run, there is money to be made while others sit it out.

Many owner-operators iStock_000021266007_Large-(1).jpgare choosing to shut down and sit out the market for economic reasons as opposed to health reasons. To determine if this makes sense, let’s look at three different examples of spot market rates so far this year. The first example is spot market dry rates and fuel costs from January 2020. The second example is closer to today’s spot market rates and fuel costs. The third example is the owner-operator choosing to sit the market out because they believe rates are too low.  

The average rate in January was about $2.00/mile. Fast forward to today and we‘ve seen rates drop dramatically, by about 30 cents per mile (a drop to about $1.70 per mile) as seen in the 2nd column below. And while $.30 per mile is indeed a significant decrease, it’s important to remember that a major contributor to this drop in rates is low fuel prices which resulted in lower fuel surcharges. In fact, falling fuel prices account for about $.09 of the $.30 per mile drop in rates. The last example in the 3rd column shows the cost for owner-operators who choose not to run because they think rates are too low. Even though they aren’t running, they still have to cover fixed costs like truck payments, insurance, etc.

  January 2020 April 2020 Haul Nothing
Miles  1,000  1,000  0
Revenue Per Mile  $1.50  $1.29  $ -
Fuel Surcharge  $0.50  $0.41  $ -
Total Rate  $2.00  $1.70  $ -
Trip Revenue  $2,000.00  $1,700.00  $ -
       
Days  2  2  2
Fixed Cost per Day  $125.00  $125.00  $125.00
Total Fixed Costs for Trip  $250.00  $250.00  $250.00
       
Gallons  166.67  166.67  0
Fuel Price  $3.05  $2.50  $ -
Fuel Cost - 6 mpg  $508.34  $416.68  $ -
Other Variable Costs  $450.00  $450.00  $ -
Total Variable Cost  $958.34  $866.68  $ -
       
Trip Profit  $791.66  $583.32  $(250.00)

 

There is no doubt that it is frustrating to only make a $583 profit when that exact same load made $791 back in January. However, the choice we have today is to either sit and lose $250, or run and make a $583 profit...that decision is worth $833! 

The bottom line is that today’s lower rate environment will certainly cut into your net income.  However, a good business owner can still make money with lower rates. Economically it absolutely makes sense to continue running to cover fixed costs and take home some profit. Otherwise, you just dig a deeper and deeper hole with fixed costs continuing to add up day after day. We don’t know when things will get better, but when they do, would you rather be stuck trying to make up lost ground, or would you rather be bringing home additional profits for you and your family?

Lastly, don't forget that there are Government stimulus programs to help offset your lower net income during this time. If you haven’t already applied for a Paycheck Protection Loan, contact ATBS today to help you get started.

Most importantly be safe and healthy and thank you for delivering the freight all Americans count on every day!

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