With the cost of operating a fleet consistently increasing over the last few years, do you have a firm grasp on your fleet’s current expenses? Knowing your fleet’s up-to-date operating costs, especially cost per mile, ensures future success.
Cost per mile can also serve as a benchmark for other aspects of your operation, including driver behavior, route optimization, vehicle maintenance, and fuel use.
In this article, we discuss how to calculate cost per mile and give you strategies for controlling — and even reducing — this important metric throughout your fleet.
Why You Should Know Your Fleet’s Cost Per Mile
Cost per mile is a financial metric that represents the average expense incurred by a business for every mile driven in a fleet vehicle.
The average cost per mile (CPM) in 2021 was $2.90, no doubt influenced significantly by the price of fuel at the pump. But the bad news didn’t stop there.
In 2022, fleet operational costs were 21.3% higher than in 2021. Again, no doubt influenced by rising fuel costs and across-the-board increases in everything from insurance premiums to the price of motor oil.
Fast forward to 2024 and very little has changed. According to Automotive Fleet, the cost per mile for all five vehicle categories increased in the first quarter of the year, from an increase of approximately 1.5% for passenger cars to an increase of approximately 7.8% for pickups.
Is your operation among those for whom cost per mile is pushing — or has already exceeded — $3.00? If so, this highlights the importance of not just knowing but monitoring cost per mile and manipulating the variables that go into it.
As you’ll see in the next section, there are a number of data points that contribute to the final calculation.
What that means for you is that once you’ve calculated CPM for a single vehicle (or your entire fleet), you can make small changes to the way your fleet operates that can bring CPM down and have huge benefits for your bottom line.
How To Calculate Cost Per Mile
Data You’ll Need
Fixed Costs
Fixed costs are expenses that remain relatively constant regardless of vehicle activity level, including lease or loan payments as well as:
- Insurance premiums
- License and registration fees
- Permits
- Telematics or GPS hardware costs and subscriptions
In some cases, you can consider regular (i.e., scheduled) maintenance as a fixed cost if you can plan on when and where it occurs. Emergency repairs would not fall into this category because, by their nature, you can’t plan when or where they occur.
Variable Costs
Variable costs are expenses that fluctuate based on vehicle activity level, such as:
- Fuel purchases and fuel tax
- Tolls and parking fees
- Mileage-dependent maintenance (e.g., tire replacement, oil changes, brake replacement) and emergency maintenance (a vehicle breaks down unexpectedly)
- Vehicle washing and detailing
Your fleet may have variable and fixed costs that aren’t mentioned here, so it’s important to conduct a thorough cost analysis of your fleet activities to identify hidden expenses that can influence the cost per mile calculation.
Total Miles Driven
The last piece of data you’ll need to calculate cost per mile is the total miles driven for the time period you want to analyze. Check the vehicle log to find this number.
What You’ll Do
1) Calculate Total Cost Of Ownership
The first step in figuring out a vehicle’s cost per mile is calculating another important metric: Total Cost Of Ownership (TCO).
Total Cost Of Ownership = Fixed Vehicle Costs + Variable Vehicle Costs
When using this formula, be sure to specify the time period you want to examine — one week, one month, six months, 12 months, or anywhere in between — and make sure that none of the fixed costs or variable costs fall outside that range.
(More on this in the Example Calculation section later.)
2) Calculate Cost Per Mile
Once you have the Total Cost Of Ownership for a vehicle, divide that number by the total miles driven.
Here’s the formula:
Cost Per Mile = Total Cost Of Ownership / Total Miles Driven
Then, once you have the CPM for a single vehicle, you figure out the CPM for all the other vehicles, add them all together, and divide that number by the total number of vehicles you operate to get the average cost per mile for your entire fleet.
Let’s look at an example to see how it all works together.
Example Calculation
Timeframe: 12 months
Data:
Fixed Costs = $48,000
Variable Costs = $50,000
Total Miles Driven = 100,000
Total Cost Of Ownership:
Total Cost Of Ownership = Fixed Vehicle Costs + Variable Vehicle Costs
Total Cost Of Ownership = $48,000 + $50,000
Total Cost Of Ownership = $98,000 per year
Cost Per Mile:
Vehicle Cost Per Mile = Total Cost Of Ownership / Total Miles Driven
Vehicle Cost Per Mile = $98,000 / 100,000
Vehicle Cost Per Mile = $0.98
Per that calculation, it costs your business $0.98 to drive that vehicle one mile.
Now, let’s say that you figured out the cost per mile for your other four vehicles. Add them all up and divide by the total number of vehicles in your fleet (in this case, five).
Average Cost Per Mile For The Fleet = Sum Of Each Vehicle’s Cost Per Mile / Total Vehicles
Average Cost Per Mile For The Fleet = ($0.98 + $1.05 + $1.10 + $0.95 + $1.21) / 5
Average Cost Per Mile For The Fleet = $5.29 / 5
Average Cost Per Mile For The Fleet = $1.06
Once you have your vehicle cost per mile (for one vehicle) or the average cost per mile for the fleet, you can start thinking about ways to change the variables that go into the calculation to reduce costs and make the final numbers smaller.
Strategies For Reducing Cost Per Mile
Monitor Driver Behavior With Telematics
Monitoring drivers with telematics can give you insight into how your vehicles are operating while on the road. Linking telematics and fuel card software can take this monitoring to the next level and allow you to discover new ways to cut costs.
You might notice that one of your vehicles was idling for half an hour (it wasn’t stuck in traffic) and then traveled 10 miles off its route to fill up.
Eliminating these two events can help you cut away some of the expenses within your variable costs, thereby lowering the cost per mile for that vehicle.
Similarly, linking your telematics systems and your fuel card software can help you detect previously unseen fuel theft and lower cost per mile even more.
Conduct Regular Driver Training On Fuel Efficiency
If you’re noticing that Driver A uses more fuel than Driver B when piloting the same vehicle over the same route, the difference could be in the driving techniques they use behind the wheel.
Driver A may be accelerating hard out of a complete stop, braking hard into a complete stop, or failing to use their cruise on long highway stretches, while Driver B is accelerating and braking smoothly and keeping their speed as consistent as possible on the highway.
Driver A’s techniques will use more fuel, reduce miles per gallon for the trip, and increase the cost per mile for that vehicle.
But, you can control this variable by conducting regular driver training on fuel-efficient driving techniques so that everyone operates their vehicles more consistently and in a way that uses less fuel.
Optimize Routes With Fleet Management Technology
Fleet management technology such as fleet management software (FMS), telematics, and fuel card software can help you optimize routes by plotting the shortest distance to a destination and even redirecting vehicles in real time to avoid delays.
This helps you cut down on many of the variable costs that come with operating a fleet of vehicles, including miles driven, time en route, engine run time, and fuel consumption. When you bring those expenses down, your cost per mile will come down, too.
Perform Regular Vehicle Maintenance
If you’re fielding an aging fleet, both expected and unexpected fleet maintenance and repair costs can skyrocket.
But, with the right program in place — including preventative maintenance and pre– and post-trip inspections — you can extend the life of your vehicles and reduce the cost per mile calculation.
Control Cost Per Mile With Coast
One of the best ways to control cost per mile in your fleet is with a smart fuel card, like Coast.
The Coast fleet and fuel card gives you all the tools and features you need to monitor and control cost per mile — and other important metrics — for both individual vehicles and the entire fleet, including:
- Open-loop capability so drivers can fuel up at the least expensive gas station
- Fuel discounts on every gallon on your statement, with up to 9¢ per gallon at our extensive network of partner stations
- Precise card rules to help you reduce unauthorized expenses and control your costs
- Fraud detection features for blocking or flagging suspicious transactions
- More accurate fuel and fleet data to help you report on your miles per gallon consumption for each transaction and vehicle, as well as the cost of your maintenance operations
To learn more about how Coast can help you improve fleet efficiency and control fleet-related costs, visit CoastPay.com today.
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