PAY
#41
08-27-2007, 03:39 AM
Originally Posted by rank
OK Merrick, with Rambler's help, I think I understand. You've got a low/no interest loan on the equipment and you didn't have to put any money down is that it? Sweet deal that.
Sure, when you pay it off you have the assets....whatever it's worth. I find if you ammortize the equipment over a timeframe that you can afford (i.e payment size), it's pretty much worn out when you're done so your asset isn't all that much. The exception to that may be trailers.....which is probably why companies like Landstar will rent you a trailer but they won't rent you a truck. You are probably right about the worth of this truck when I'm done with it. You know I paid I think 8 or 9 thousand for my car and every year that goes by (about 5 and 1/2 years now) I think how much this car has really cost me per year and obviously the longer I keep it it was smarter and smarter to buy it and keep it. The guy I'm working with trades in the trucks every 3 years and somehow he said (and I don't doubt him) he doesn't lose out as much as trucks keep their worth until 500k miles(I think that's the number he used) I wonder really how true it is? 
#42
08-27-2007, 04:38 AM
Ridge Runner and Dispatch_This are looking at this as a business that needs to stand on it's own two feet no matter where the cash to acquire the equipment comes from.
I agree with both of them in terms of truly looking at the cost of the business....if you pay cash (you're the banker) or borrow the money (they're the banker) that money is being invested and you should be able get back the amount you invested PLUS interest when you sell the asset. You are certain that the bank is doing that...why shouldn't you? Add to your business plan your ROI (return on investment) on the money you invest in the business whether it is an all cash payment for the truck-trailer or a partial investment. It should be a "cost". Compare it to leaving that money in a bond or mutual fund. I know there is the "freedom-bemyownboss" stuff but you need to know how much your paying (or not) for that freedom. So I agree 100% with you both...that is the way to look at your business. What Dispatch_This wrote:
How to determine your true truck cost.
What you pay for your truck MINUS what you eventually sell it for, MINUS what the money would have earned if you put it in a safe investment. Let's assume you pay $50,000 cash for a 2004 Pete, and have decided to sell it in five years no matter what, and get out of the trucking business. 2012 comes along, the wholesale value of your truck is $25,000. Your actual truck cost was $25,000 for five years. If you drove 500,000 miles during that time, than that would be .05/mile. But wait - If you had put the $50,000 in a money market account at 5% you would still have the whole $50K plus about $14,000 in interest for a total of $64,000. So your truck cost was 25,000 plus 14,000 for $39,000, or .078/mile.
#43
08-27-2007, 05:26 AM
Originally Posted by geomon
Ridge Runner and Dispatch_This are looking at this as a business that needs to stand on it's own two feet no matter where the cash to acquire the equipment comes from.
I agree with both of them in terms of truly looking at the cost of the business....if you pay cash (you're the banker) or borrow the money (they're the banker) that money is being invested and you should be able get back the amount you invested PLUS interest when you sell the asset. You are certain that the bank is doing that...why shouldn't you? Add to your business plan your ROI (return on investment) on the money you invest in the business whether it is an all cash payment for the truck-trailer or a partial investment. It should be a "cost". Compare it to leaving that money in a bond or mutual fund. I know there is the "freedom-bemyownboss" stuff but you need to know how much your paying (or not) for that freedom. So I agree 100% with you both...that is the way to look at your business. What Dispatch_This wrote:
How to determine your true truck cost.
What you pay for your truck MINUS what you eventually sell it for, MINUS what the money would have earned if you put it in a safe investment. Let's assume you pay $50,000 cash for a 2004 Pete, and have decided to sell it in five years no matter what, and get out of the trucking business. 2012 comes along, the wholesale value of your truck is $25,000. Your actual truck cost was $25,000 for five years. If you drove 500,000 miles during that time, than that would be .05/mile. But wait - If you had put the $50,000 in a money market account at 5% you would still have the whole $50K plus about $14,000 in interest for a total of $64,000. So your truck cost was 25,000 plus 14,000 for $39,000, or .078/mile. Finally!!! Someone gets it!!!!
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#44
08-27-2007, 10:18 AM
I agree with everyone above, you still have to count the money you put out towards your expenses. If Steve put out 40,000 he should make payments back to himself for the next 4 or 5 years, with interest.
I talked to my accountant before I bought my truck a couple weeks ago, because I wanted to know the best way to go about it. I had two options pay for it, out of my existing business account, or my personal line of credit. As per our conversation he advised me to pay for it with my personal line of credit, even though I'll pay that back with bonuses from my business. Then when I'm ready to put the truck to work, I'll set up the company and it will start to pay me back for the truck with interest if I want to do that. (I hope I pass my credit check :lol: ) It doesn't matter how much time elapses till I start to work it either. Another thing, when the business starts to pay me back the truck will get depreciated over 5 years and that includes the interest if I charge myself any. Now, here's something else you guys can think about, if you pay cash and charge yourself interest should it be high or low interest? I didn't get that far with my accountant so I don't know. Also, I freely admit that I'm not the sharpest knife in the drawer, so I like to see what some of you might say.
#45
08-27-2007, 01:38 PM
when paying cash for a truck in the example the loss of 5% interest was used I also think you need to figure in that you are not borrowing from a bank that would charge 9% or 10% so it could be said that by paying cash you are still making 4% on your money.
#46
08-27-2007, 02:08 PM
Originally Posted by furbis
when paying cash for a truck in the example the loss of 5% interest was used I also think you need to figure in that you are not borrowing from a bank that would charge 9% or 10% so it could be said that by paying cash you are still making 4% on your money.
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#47
08-27-2007, 02:35 PM
Originally Posted by wild bill
I would like to thank all of you for your comments and opinions, it has been very informative to say the least.
For what it's worth my Brother inlaw says his cost per mile is .60 pm. I still have a month or so to make up my mind, I will talk with him and try to get a good idea of what his net is on average. He's been driving for thirty years and he has been with his present company for the last eight. He pretty much runs the same area every week so he should be able to give me a accurate estimate as to what I will be making. Thanks again.  I pay myself .50 cpm + benefits (health ins, retirement). Why run the risk of ownership if I can't make as much as I could in a co. truck? Fuel, I'll be generous and say that he's getting 7.5 mpg @ an avg of 2.75 per gallon; would be .37 cpm. Then there's: Administrative fees Banking fees Communication - internet access... Dues & Subscriptions Fuel & Oil Insurance -Health -Physical damage -Cargo -Liability -Disability (long and short term) -workman's comp or occ/acc License plate Permits Physicals & drug tests Motels Office supplies Office equipment - cell phone, pager, laptop.... Parts Postage Professional fees Repairs & maintenance Salaries Supplies Taxes -2290 -IFTA Telephone Tires Tolls/Scales/Prepass Tools Parking Washes & Lubes Not a complete list, but most of it is there. I realize that some leased O/Os may not pay all of this, but most. Please tell me how to do all of this on .60 cpm without driving junk and not maintaining it, then pay myself and make a profit (which I figure into my cost per mile, it's under Salaries and should be included, though many don't).
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$$$$ NOT miles
#48
08-27-2007, 02:40 PM
...on paying cash... we have, for the last 2 out of 3 trucks and trailers, the other would have taken a 14-16 mos to pay for if we had kept it; or we could have written the check, but didn't want to; that truck was $200k.
The trick is to pay yourself the truck payment when you don't have it. I pay a truck payment of $2500 per month every month and have for years, although I owe nothing on my truck or trailer and likely never will since I've been paying one into an investment acct instead of a bank or finance company for over 7 years.
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$$$$ NOT miles
#49
08-27-2007, 02:47 PM
My cost per mile last year was $1.03 plus wages & benefits, equaling another .60 cpm. That's .50 cpm wages, plus health insurance and 2 fully funded ROTH IRAs. And yes, there was profit above that.
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$$$$ NOT miles
#50
08-27-2007, 03:29 PM
RostyC....glad to hear you bought a truck. What did you end up with? Pictures???
Truckdobe...those are all typical business costs that you listed. I suppose most people simply don't account for that in their business so have no idea of their true costs. And like gman alwasys says....are slowly running themselves out of business. For Truckdobe, $1.03 + $.60 (wage/bennies) = $1.63 so that is the breakeven point for running the business at cost or profit. Of course each person's situation and costs and totals will be different but people; you should be adding all these into your business plan to make sure you end up in the black and not the red 8) |
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