Metal fatigue sets in and the structural integrity of the undercarriage, the engine, the transmission and so on wear out. What drives the (no pun intended) structural integrity lower is the stress from constant moving of the metal. Unlike a bronze statue that can literally last 120 years without any maintenance, transportation units do have a life expectancy. The total actual cost out divided by the expected number of miles assuming regular maintenance on the unit. Now that we have the fixed costs groups, let’s analyze how to calculate the respective cost per mile associated with the respected fixed cost. As the unit ages, the property tax component will decrease due to the value change, but overall you should expect to pay approximately this amount annually. For a work truck like the one above, a typical business will pay around $680 per year for licenses, taxes and compliance. Finally, there is the compliance component which is the safety inspection each year. In addition, your county or city government taxes the property as personal or business property. Each year your vehicle requires a license and registration decal to travel on the roads. In effect, you are renting your vehicle from the government. I’ve never understood how the government can tax the initial purchase price of the vehicle and then tax it again each year as personal property. Licenses, Taxes & Compliance – I love to hate this one.For this article, I am going to price the insurance at $3,100 per year for up to 20,000 miles. There a lot of other variables such as good drivers, proper training, governors on the gas flow, and more. The policies are generally for one year and range from $2,000 to as much as $4,000 depending on the mileage allowance you signed up for in the contract. Most policies provide an allowance for the number of miles. Insurance – rarely do businesses find an insurance policy that is strictly based on the number of miles you drive.However, it is not a variable cost as you may think, it is fixed because you must make the note payment whether you drive the truck or not. There is one issue with this interest payment it decreases as the loan matures. On a monthly basis, only the interest is a true cost to the business. The principle payment component is paying for the initial purchase price. The financing component includes interest and some principle repayment. Monthly Interest – since work trucks can be easily financed, most small businesses finance the purchase. For this article, the initial cost of the vehicle is $42,800. Throw in a drop down ramp, dolly set, interior rails, clip controls with boards to control the load and you can be looking at another $3,300. Modifications can include custom paint work for your company’s logo, phone number etc. If you decide to add some extras such as A/C, bucket seats etc., you are looking at a $39,500 vehicle. This cube truck costs around $37,000 new without any amenities. You should include any modifications to the vehicle to get it ready for your business. This is really a sunk cost in the cost accounting world, but for the purposes of analyzing the cost per mile for business operation, this particular outlay is considered a fixed cost.
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