Costs Rise 20 per cent.
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Comparisonsin the Many items of Road Transport Cost that Have Increased in the Past Nine Months Are Described Here
FEW will credit the fact that operating costs have increased during the past nine months by nearly one-fifth. Actual figures which I have worked out in relation to a 6-ton oiler and 6-ton petrol-engined vehicle show an addition to operating costs in that time in excess of 19 per cent.
First let me set out the figures of operating costs as they applied in March of this year. The original request for this information came from a Kura' area and I am going to give figures which obtain in such a district.
The first cost of an oil-engined 6-ton drop-sided lorry on
that date totalled approximately £1,320. This comprised chassis at £1,175, body £90, painting and lettering £55. That is the actual amount from which I propose to calculate two of the items of operating costs, depreciation and interest.
According to the specification of the vehicle, it is equipped with 35 by 7i tyres, single on the front, twins on the rear. The cost of a cover of that size in March was £18 Os. 6d. and of a tube, £1 12s. 6d. The cost of a set, therefore, was £117 18s.„ say £118.
In calculating depreciation, the first step is to take the cost of the tyres from the initial outlay on the vehicle. Doing so I get £1,202. The tricky part is estimating the residual value, the price the operator may expect to obtain for his vehicle after he has used it for six years. Usedvehicle prices are so variable to-day. I imagine, however; that in six years that situation will have become normal and will be somewhat similar to what we were accustomed to before the war. In that case, I think it is fair to assume that the operator will obtain £200, say £202 for it. Deducting this residual value from the £1,202 then 1 have £1,000 as the amount on which depreciation is to be calculated. On the basis of a life of six years that is £167 per annum, approximately £3 7s. per week.
The other item mentioned as being dependent upon the first cost of the vehicle is interest. It is usual in these days to take 3 per cent, as the basis of that calculation. and 3 per cent. of £1,325 is £39 15s., which is 16s. per week.
I am going to assume that the unladen weight of the vehicle does not exceed 3 tons--that is to say, the unladen weight as assessed for purposes of taxation does not exceed 3 tons. In that case the road-fund tax will be £35, which is 14s. per week.
Modest Rent
In March of this year, the amount the operator in a rural area would have to pay for insurance would not be likely
to exceed ELIO per annum for a comprehensive policy, which is 16s. per week. The garage rent would be comparatively modest and 5s. per week would cover it.
The next item is wages. In a grade II area, the basic rate was £5 2s. per week for 44 hours. To that I added 4s. 2d. per week on account of the employer's contribution for national insurance, 4s. per week for provision for the driver's holiday with pay, and approximately Is. 10d. per week to pay for insurance to cover the employer against the risks of action for damages under common law. That brings the total, wages plus holiday pay plus insurances, to
£5 12s, per week. So far as establishment costs are concerned I am going to be dogmatic and state that in the case of running three or four vehicles, the amount to be debited under this heading cannot be less than £2 10s. per week. The above are all the items of fixed expenses per week. Setting them down in the usual order they are: tax, I4s.; wages, £5 12s.; garage rent, 55.; insurance, I6s.; interest. 16s.;. depreciation, £3 7s.; and establishment costs £2 10s, , The total is f14 per week.
c24
The running costs per mile-and do not forget that I am still in March of this year-were as follows:-First the consumption of oil fuel, for which an average return is 18 m.p.g., and with fuel at Is. 11d, per gallon that was equivalent to 1.28d. per mile. For engine oil I shall assume a figure of 0.2d, per mile, that being the average amount expended in respect of that item.
For tyres I assume a life of 21,500 miles per set. That is a figure which I have found applicable for the majority of vehicles engaged in rural areas since they are in the habit of negotiating unmade roads, quarries, railway goods yards and the like. A good deal depends upon the amount of care which the tyres receive, of course, but 1 think the figure suggested is reatonable. I have already pointed out that the cost of a set of tyres is £118, and if I divide that by 21,500 miles I get 1.32d.
Basic Figures
Maintenance will cost about 2d. per mile. These are all the running costs: fuel, 1.28d.; lubricants, 0.2c1.; tyres, 1.32d.; and maintenance, 2d. Total 4.8d. per mile.
The above were the basic figures for the operation of a 6-ton oiler in March.
Now let me give the corresponding figures to-day. The chassis price of a 6-ton oiler to-day of the same type as that which I used in the original example is £1,750. I will be on the safe side and assume that the cost of the body and painting will be he same as before, namely, £90 and £55 respectively. The total cost of the complete vehicle, therefore, painted and lettered and ready for the road, is £1,895.
I now turn to tyres. The cost of a 35 by 7i cover to-day, including provision for the latest increase of 171 per cent., is £23 6s. The cost of a tube £2 Is., so that the cost of a cover and tube is now £25 7s., and the total for a set of six, £152 2s. I will take £152. Taking the cost of the tyres, £152, from the cost of the vehicle gives me £1,743. If I assume a residual value of £243 that leaves me £1,500 as the amount on which depreciation and interest must be calculated.
Using a six-year life as a basis, as I did in the other example. I find that the depreciation per annum is £250, which is £5 per week. For interest I take 3 per cent, of £1,895, which is £57 or El 2s. 6d. per week.
think 1 may reasonably assume that the proposed increase of 7s. per week in wages set out in R.H. (35) is likely to be confirmed, so that the total for wages, insurances and holiday pay, will now be £.5 I9s. 6d. in a grade 11 area.
Higher Insurance I have not had any official or general intimation that insurance rates are increasing, but 1-have met several haulier friends who have shown me letters from insurance companies stating that future premiums will be 25 per ceni in excess of those they are now paying, and it seems, therefore, that I shall have to take that into consideration in the calculation I am now making. Instead, therefore, of allowing 16s. per week on account of insurance I must now take El.
As regards establishment costs. I shall assume that there has been no increase since March.
The fixed charges per week as they are to-day may. therefore, be set out as follows:-Tax, 14s.; wages, £5 19s. 6d.; garage rent, 5s.; insurance, £1; interest, £1 2s. 6d.; depreciation, £5; establishment costs, £2 10s. The total is £16 lit.
In the running costs, I have to take account of two substantial increases in respect of fuel and tyres. Fuel oil to-day costs 2s. 60. per gallon and, at 18 m.p.g., that is equivalent to 1.7d. per mile. Tyres at £152 per set, and taking 21,500 miles as the life of a set as 1 did in the previous calculation, then 1 get 1.7d. for tyres. 1 am going i3 assume that the cost of lubricants still remains at 0.2d., and I am going to debit the same amount for maintenance as before, namely. 2d. There may have been a slight increase in maintenance costs but it is not a figure which can be set down with any great confidence as to its accuracy, and l propose, therefore, to leave it as it was.
The running costs, therefore, become for fuel, 1.7d.; for lubricants, 0.2d.; for tyres, I.7d.; for maintenance, 2d:— a total of 5.6d.
Fixed charges per week have thus in that short time increased from £14 to £16 I Is., an increase of almost exactly 20 per cent. Running costs have increased from 4.8d. per mile to .5.6d. per mile, an increase of 14 per cent.
If I assume a 240-mile week, then the total cost of operation, including establishment costs, of course, in March of this year, was £18 16s. To-day, assuming the same weekly mileage and-the application of the wage increase of 7s. per week, the total cost is £22 3s., which is an increase of 19 per cent_ Petrol-engine Costs
There will be many who will be concerned to note what the figures are in relation to a petrol-engined vehicle of the same capacity. For the convenience of those readers I propose to give the corresponding figures for that type of vehicle. First, as they were in March of this year. The chassis price for a petrol-engined vehicle, of the same type and make as the oil-engined machine with which I have already dealt, was £1,020 in March. Adding £90 for bodywork and £55 for painting and lettering, I get a total of £1,165. Deducting £118 for tyres leaves £1,047.
In assessing the residual value, I have assumed, as is usually the case with the price of used petrol-engined vehicles, that it is generally lower than that which can be obtained for oil-engined machines, and I propose to take £147 as the approximate figure. That leaves me with £900 as the net amount on which I must calculate depreciation. Taking six years as the period I get £150 per annum, or £3 per week.
For interest I have 3 per cent. on £1,165. which is £35
per annum or 14s. per week. The other items of fixed charges will not be affected, and the following is a summary and total:—Tax, I4s.; wages, £5 12s.; garage. rent, 5s.; insurance, 16s.; interest, 14s.; depreciation, £3; establishment costs, £2 10s. Total, £13 lis.; 9& per week less than that for the oil-engined vehicle.
So far as running costs are concerned the following were applicable at that time:—For petrol, I think I am generous if I take 10 m.p.g. and with fuel at 2s. 2d. per gallon that is 2s. 6d. per mile. For lubricants I take the same as the oilengined vehicle, namely, 0.2d.; for tyres also the same, 1.32d., and for maintenance rather more than the oil engine, say 2.2d. The total is 6.32d. as compared with the 4.8d. for the oiler.
Six-year Life Basis The chassis price of a vehicle comparable with that specified above is £1,600, and with the bodywork and painting and lettering the total becomes £1,745. Deducting £152 for tyres leaves £1,593, and taking £193 as the residual value, leaves £1,400. On the basis of a six-year life that is £234 per annum, or £4 14s. per week. Interest at £3 per cent. on £1,745 is £52 7s. per annum, which is approximately £1 Is. per week.
The weekly fixed charges to-day can, therefore, be set out as being:—Tax. 14s.; wages, etc., £5 19s. 6d.; garage rent, 5s.; insurance, £1; interest, £1 Is.; depreciation, E4 14s.; establishment costs, £2 10s. The total is £16 3s. 6d.
For the running costs, petrol, assuming 10 m.p.g. and 2s. lid, per gallon, is 3.5d.; lubricants, 0.2d.; tyres, 1.7d.; maintenance, 2.2d. Total 7.6d.
To summarize: the above had in March fixed costs of £13 lls. per week. and running costs of 6.32d. per mile. To-day, the corresponding figures are £16 3s. 6d. per week for fixed charges and 7.6d. per mile for running costs. The increase for fixed charges is nearly 20 per cent. The increase in running costs is a fraction over 20 per cent. If I take as before the figures for a 240-mile week the total cost in March was £19 7s. 6d., and the total cost to-day is £23 19s. 6d., which is almost 20 per cent.
The haulier's charges, as is inevitable if he is to continue to make a profit pro rata to his expenditure, should, therefore, to-day be approximately 20 per cent, higher than those which he was making in March of this year.