So far, 2023 has proven to be a difficult year with low freight volumes and rates in both the spot and contract markets. The question now is… where do we go from here?
In this article, we'll give a recap of the first half of the year and answer questions including:
What are the latest trends with miles, rates, fuel costs, and maintenance?
How badly has the difficult trucking market affected the IC's bottom line?
What has happened to the IC population during this downturn?
What have the best ICs done to survive in this market?
What's next for the trucking industry?
Interested in learning more? Check out our full Independent Contractor Benchmarks and Trends Webinar, where we give a more in-depth recap of how owner-operators have performed so far in 2023!
Table of Contents
Recap of the Past Three Years
The past three years in the trucking industry can be easily described in one word…insanity! Spot rates, fuel, truck costs, and interest rates have fluctuated between extreme lows and record-breaking highs. Below is a quick snapshot of some of these figures.
Spot rates
June 2020 - $1.65/mile
June 2021 - $3.15/mile
Aug 2023 - $2.25/mile
Fuel
June 2020 – Fuel futures were negative, meaning an oil company had to pay you to take their fuel
June 2022 – Diesel hit its highest price ever over $5.75/gal
Truck Cost
June 2020 – Avg Used Truck $55,000
December 2021 – Avg Used Truck $140,000
Aug 2023 – Avg Used Truck $68,000
Interest Rates
Prime Rate March 2020 = 3.25%
Prime Rate Aug 2023 = 8.50%
The hope is that these numbers eventually become easier to track and manage at more normal levels.
Freight Rates
From May of 2020 through April of 2022, we saw one of the biggest increases in spot market load volumes and rates in the history of trucking. But in April of 2022, while contract rates remained somewhat stable, spot market rates and load volumes began falling dramatically. Here are some numbers to illustrate this shift in the market:
Peak- November of 2021
Loads: 240 loads per 1 truck looking for a load.
Rates: $2.49 per mile (without fuel surcharge).
February 2023
Loads: 55 loads per 1 truck looking for a load
Rates: $1.80 per mile (without fuel surcharge)
Today- September of 2023
Loads: 60 loads per 1 truck looking for a load.
Rates: $1.93 per mile (without fuel surcharge).
That is a 77% drop in the number of loads available, and a 28% drop in rate per mile (net of fuel surcharge) through February. However, we have seen an 8% increase in the number of loads and a 7% increase in rate per mile (net of fuel surcharge) since February. These major declines have caused a significant number of owner-operators that were running on their own authority to leave the spot market and lease-on to carriers where load volumes and rates are currently more stable. Those that remain have seen a recent uptick and hopefully weathered the storm.
Miles
In the beginning of 2023, we finally saw drivers begin to run more miles. We expected to see this sooner, as drivers tend to drive more miles during challenging times. What this tells us is that some drivers may just now be feeling the stress of the tough market after times had been good.
ICs started running more miles, and it’s already having a positive impact on net income! However, if drivers are running more miles, it means capacity will remain high, which could actually extend the down market.
Overall, miles have dropped significantly over the past 20 years. In 2003, owner-operators averaged about 140,000 miles per year, and today, they are down to a little under 90,000 miles per year. As long as the market stays difficult, miles should continue to trend higher.
Revenue
Owner-operator revenue has seen a jump of almost 6% year-over-year. However, this is largely attributed to the rising fuel prices, resulting in an increase in fuel surcharge.
From July 2022 until June 2023, we had been seeing a steady decline in owner-operator revenue, but it seems like things have leveled off since then. We expect net rates to remain relatively stable, but total rates to jump as the fuel surcharge increases.
Fuel
Over the last two years, owner-operators have enjoyed a booming freight market that enabled them to make good money and save up some cash while not having to worry about costs. However, with revenue per mile now dropping and fuel prices on the rise, drivers are now beginning to focus on optimizing their fuel efficiency and increasing their MPG.
As diesel prices continue to rise across the United States, owner-operators could possibly soon see prices over $5.00 per gallon again. With this in mind, if you haven't begun making changes to your driving habits to improve MPG, now would be the time to start. Luckily we just recently launched 25 ways for owner-operators to do just this.
Maintenance
When it comes to maintenance costs, overall it's only up a little. However, the amount an owner-operator pays per mile is actually slightly lower than before.
The average IC is paying $1,000 per month of maintenance. This cost depends on the age of your truck, the routes you run, and the mileage you drive. You need a custom maintenance plan to make sure you are covered for the repair, the fixed costs when you are down, and your home bills while not generating revenue.
Net Income
Overall, owner-operator net income is down 9% to $63,114. While this might be a tough pill to swallow, we have seen indications that net income may have bottomed out and is about to rise, albeit slowly. This drop has been seen across all segments of the trucking industry, meaning the grass isn't greener when thinking about jumping from one type of freight to another.
Average net income is now lower than it was before the pandemic, However, the best owner-operators have not lost much at all. This is because when times got tough, they started to run more and focus on fuel efficiency. We're finally starting to see more owner-operators follow this same strategy.
+1/-10
Incremental and small changes are the best thing you can do today. The two charts above illustrate the top two things the average IC can do to dramatically increase their income, increase their revenue, and decrease their costs. Increasing your revenue could just mean 1 more load a month, which is illustrated above. There are many ways to decrease your costs, but fuel is your biggest cost and the one you can control the most. Just 1 mpg better means taking home $8,000 or more in profit!
If you do one of the two things above, you’ll increase your net income by $150 a week, $8,000 per year. If you do both, you’ll take home nearly $300 more per week, or $15,000 a year.
It might not be possible to run 500 more miles a month or get 1 mpg better, but if you do a little bit of each, you’ll see drastic improvements to your net income.
Rest of 2023 Freight Outlook
Revenue per mile slipped almost everywhere but seems to have bottomed out. However, it may not start going up for a while.
Miles are finally trending upward, but only by 2,500 annually. Increasing your miles by even more can dramatically improve your take-home pay.
Fuel MPG has only barely improved. We can do better - slow it down!
The best owner-operators have run more miles & increased their MPG. Their net income hasn’t gone down!
Save for maintenance & downtime, it’s the number 1 cause of IC failure.
The best businesses and owner-operators are still doing well. The increased cost of fuel gives drivers the chance to improve fuel efficiency, run a little harder, and continue to succeed in trucking! The bottom line is that owner-operators control their own destiny, and they can make changes today to ensure profitability and success!