It takes a tremendous amount of capital to run a trucking company.
It’s all relative, of course. A company such as J.B. Hunt Transport Services Inc. of Lowell spends millions of dollars a year on equipment. A single-truck owner-operator might spend many thousands.
And those costs are going up.
It’s a supply-and-demand situation. The freight recession has driven down what carriers can charge, while inflationary pressures have made operations more expensive.
The American Transportation Research Institute of Arlington, Virginia, released an annual study last summer that detailed the operational costs of trucking for 2022. The cost-per-mile for operating a truck surpassed $2 for the first time, reaching $2.25 a mile.
Fuel is the No. 1 trucking cost, and the price of diesel was more than 53% higher in 2022 than it was in 2021, the ATRI said. And the costs of buying or leasing tractors and trailers rose from 27.9 cents per mile to 33 cents (18.6%) from 2021 to 2022.
On a per-mile basis, repair and maintenance rose 12%, from 17.5 cents to 19.6 cents, and the price of tires rose from 4.1 cents to 4.5 cents, which is nearly 10%.
Jeff Loggins has been in the transportation industry for 40 years, so he is no stranger to the up-and-down ride of running a trucking company. Loggins started Loggins Logistics in Jonesboro in 1997, and he was elected chairman of the Arkansas Trucking Association’s board of directors in 2022.
When he spoke to me about trucking insurance recently, he mentioned the rising costs of equipment as another thorn in a trucking executive’s side.
Loggins owns 10 trucks and contracts with another 65 owner-operators. His company is primarily a flatbed trailer hauler, so he regularly needs to buy new tractors and new trailers.
He was in a bind when he went tractor shopping because the freight recession had knocked out his profits, and the price of new tractors had risen significantly. Usually, Loggins will sell one of his used tractors, take that sum and use it as a big chunk of the new tractor payment.
However, new tractors, Loggins said, were now $190,000 instead of $120,000-$130,000. An additional $700,000 in expenses for tractors was a hard pill for Loggins to swallow.
Through careful use, a trucker may be able to make a 5-year-old trailer last another year, but an old tractor can be almost too costly to operate, especially when maintenance costs are rising.
“That was $700,000 in costs that we are having to eat right now,” Loggins said.
It’s no different for large public companies like J.B. Hunt or ArcBest Corp. of Fort Smith. During J.B. Hunt’s conference call in January to discuss its fourth-quarter fiscal 2023 results, Chief Financial Officer John Kuhlow said the company expected to spend between $250 million and $300 million on new equipment and the same amount on new trailing equipment in fiscal 2024.
ArcBest said it expected to spend between $325 million and $375 million on capital expenditures that include new tractors and equipment.
Small-fleet companies make up a vast majority of the trucking industry. The ATRI said more than 95% of companies own fewer than 10 trucks. A company such as Loggins Logistics is considered small only when compared with public companies, but it is considerably larger than most companies nationally. Smaller companies, which the ATRI report listed as those with 100 or fewer trucks, paid 7.7 cents more per mile to operate a truck than larger companies.
For small companies, the per-mile costs of leasing or purchasing tractors or trailers increased 8.2% and repair and maintenance costs increased 7.6% from 2021 to 2022. For larger companies, the increases were 20.4% and 15.5%.
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