Changing Carriers, O/O help deciding please

Its an old train of thought in the trucking community that big miles = big pay.

*Drive smarter, not further.

 

dtsc who are you pulling for now if you dont mind me asking

 

So many owners seem to be stuck on mileage leases. They think the answer is more miles and are afraid to chance a percentage lease. Their replies are I get paid on empty miles now and I would have to watch my DH if I went to percentage

Most mileage leases are paying less than a dollar a mile empty. This won't pay fuel, repairs and wages. That is not pay. IMHO, percentage leases pay 0.25 - 0.50 CPM better.

I know a lot of owners are scared of the unknown. I guess it is easier for those of us who have ran back in the day when there was no such thing as a mileage lease. That was back when companies actually expected to share the profit with the person earning it and not make them run themselves and their equipment into the ground.

Let's look at a couple of examples. These may not be exact numbers but are close to possible situations that do exist.

Suppose you run 150,000 miles with 8% deadhead. That is 138,000 loaded and 12,000 empty miles. You get paid 1.30 CPM (0.95 CPM freight plus 0.35 CPM FSC) loaded and 0.95 CPM empty. 138,000 * 1.30 = $179,400 and 12,000 * 0.95 = $11,400 and $179,400 + $11,400 = $190,800. At 6.5 MPG and $3.90 per gallon you spend about $90,000 on fuel (150,000 / 6.5 * 3.90 = $90,000). Earnings after fuel would be $100,800.

Suppose you run 140,000 miles with 16% deadhead. That is 117,600 loaded and 22,400 empty miles. You get paid 1.70 CPM loaded and nothing empty. 117,600 * 1.70 = $199,920. At 6.5 MPG and $3.90 per gallon you spend about $84,000 on fuel (140,000 / 6.5 * 3.90 = $84,000). Earnings after fuel would be $115,990.

So with the higher paying percentage lease you run 6.6% or 10,000 miles less for the year and your deadhead doubles to 16%. You earn $9,000 more in revenue and save $6,000 in fuel for an additional $15,000 in your pocket.

Now to further make the point about how futile it is chasing miles to increase revenue let's look at only running 120,000 miles with 16% deadhead in the percentage lease. That is 100,800 loaded and 19,200 empty miles. You get paid 1.70 CPM loaded and nothing empty. 100,800 * 1.70 = $171,360. At 6.5 MPG and $3.90 per gallon you spend about $72,000 on fuel (120,000 / 6.5 * 3.90 = $72,000). Earnings after fuel would be $99,360. So at 30,000 less miles you only make $1,400 less after fuel.

The problem with running for a cheap rate is how big a percentage of the gross is spent on fuel. At $3.90 per gallon and 6.5 MPG your fuel cost is 0.60 CPM (3.90 / 6.5 = 0.60). When you haul for 1.30 CPM you spend 46.2% of gross on fuel (0.60 / 1.30 = 0.4615). At 1.50 CPM fuel is 40.0%, at 1.70 CPM fuel is 35.3%, at 1.90 CPM fuel is 31.6% and at 2.10 CPM fuel is 28.6%.

 

There were a few drivers at the company I am currently with that had this same thought. After a few months they quickly realized their mistake. A unspoken rule at my carrier is that once you leave you have a very slight chance of ever getting rehired.

Add in a couple of beers and the thought of making profits closer to a dollar a mile and it makes the LTL field very acceptable for me. Especially when the vast vast majority of o/o believe in the mile theory and worry about pennies per mile profit. A associate told me before I started this gig that after a while I would feel like walking across the parking lot and dropping a $100 bill would be no big deal in the big picture of things...he was right. I drop about $100-150 a week on things to get me unloaded quicker (guys down stacking palllets, getting the recievers attention, and what not) so I get on to my next drop. This extra cost a week helps me generate a extra $1000 or so every week.

You can still have a long LTL career and be older. There are many guys that are 50+ at my current carrier. They do it for the love and generally go to the same places week in and week out. They have great reputations at these places and workers go out of their way to help them. Plus to be honest...my job really isn't that hard if you are use to hard work.

 

Great post. Really puts things in perspective. About to quit my current mileage gig and get into a percentage one. They tried to talk me out of it with talking points of excessive deadhead and wondering if "I would get the miles" from load boards or agents. I had an answer for the latter but not the former. I wont be so worried about deadhead. Anyways this post IMO shows there really is no good excuse to stick with mileage plan. Even living in a so-called dead freight area.