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Reconciling Outlay With Costs
Page 124
Page 127
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The Effect of Specification on the 10 Items of Standing and Running Expenses Should be Carefully Examined When Considering the Purchase of a New Vehicle
THE post-war expansion of industry and the advent of new manufacturing processes have resulted in a corresponding demand for increased and more versatile transport services. Both the transport operator and the commercial vehicle manufacturer have combined to meet this demand by the introduction of new or more comprehensive services and by an increased range of vehicles. in such circumstances it becomes all the more necessary to analyse carefully the potential advantages, and possibly disadvantages, of the several types of vehicle available.
Whilst the combination of a quality produced chassis and a specialist-built body has always provided an ideal vehicle to meet the precise needs of individual operators, alternative specification is now available on a wider range of vehicles. The possibility of an injudicious choice is therefore increased. In contrast to the purchase of a private car, the prime factor in determining the choice of a goods vehicle is the type of traffic carried and the quantity and frequency, with which it is moved. Particularly where retail deliveries are concerned, road congestion in urban areas may compel the selection of a vehicle which is not ideal economically.
THE opportunity to match the vehicle to the job is obviously more readily available to ancillary operators who are largely concerned with either one or a limited group of traffics. Additionally, they would normally have control over one, if not two, terminal points. Such matters as the height of loading bays and the platform of the vehicle can also be more readily standardized, as can the employment of mechanical handling methods. ,
Variations in vehicle specification relative to the body must be largely individual to each operator, but alternative equipment fitted to the chassis has more general application, and will bear more directly on one or more of the 10 items of operating costs, For example, the addition of a two-speed axle may effect some reduction in the overall fuel cost, whilst variation in t9re equipment could also have an appreciable effect on ultimate costs.
With the advent of the smaller oil engine, the alternative of this type of propulsion is now available in practically the whole range of commercial vehicles. Substantial reduction in fuel costs can be achieved where the average annual mileage is sufficient to offset the higher initial outlay involved. But even this price differential as between the petrol or oil-engined version of a similar vehicle has been substantially reduced now that both are available as a manufacturers' alternative specification, as distinct from an individual conversion as was formerly the case.
pARTICULARLY where bulky loads are carried, the extra Platform length provided by an articulated vehicle may be of equal or even greater importance than its maximum carrying capacity. The maximum legal gross weight for the various types of goods vehicles are as follows: Rigid four-wheeler, 14 tons; six-wheeler, 20 tons; and eight-wheeler, 24 tons, whilst a drawbar trailer is permitted a maximum weight of 14 tons. The combined weight of a vehicle and trailer with power-assisted brakes must not exceed 32 tons. There is throughout the additional qualification that the load on one axle should not exceed 9 tons.
The maximum length permitted for a rigid goods vehicle, whether four-, sixor eight-wheeler, is 30 ft. This is increased to 35 ft. in respect of articulated vehicles, whilst the length of a draw-bar trailer can be up to 22 ft., although no specific maximum is laid down for the combined length of a rigid vehicle with draw-bar trailer.
The following comparison between the operating costs of a petrol-engined or, alternatively, oil-cngined 30-cwt. van are given as an indication of the relation between the initial outlay and the subsequent operating costs. For example, the initial outlay on the petrol-engined version would be approximately £813, whilst the total operating costs, when averaging only 300 miles a week, would amount to over £5,000 during five years of operation.
Dealing first with the standing costs of the petrol-engined van, the unladen weight of around 12 tons would incur an annual licence duty of £27. This would give an equivalent standing cost per week of 10s. I Id. This is based on a 50-week year, so as to allow for two weeks a year when the van might b.z. off the road either because of overhauls or holidays.
Because this type of vehicle would normally be engaged on retail delivery, the comparatively low average weekly mileage of 300 is assumed and, correspondingly, the driver's wages are calculated on a basic 44-hour week. Where the rate payable to an adult driver in Grade I areas as defined in the Road Haulage Wages Regulations R.H.(70) is applicable, the total cost of wages to the employer is reckoned at £9 14s. 104. a week. This amount includes the employer's contributions to the new Graduated Pensions and National Insurance as well as employer's voluntary liability insurance. An appropriate adjustment is also made to allow for a two-week holiday with pay for the driver.
Although there must obviously be substantial variation in the garaging facilities provided for this type of vehicle, it will here be assumed that the equivalent weekly cost in respect of rent and rates incurred in providing such accommodation would amount to 9s, 6d. a week.
TN recent months there have not only been substantial 'increases in commercial vehicle insurance premiums, but, in addition, considerably more attention is being paid to the accident records of individual operators. As a result it has become more difficult to determine a fair average cost of vehicle insurance and it will here be assumed to be the equivalent of 10s. 7d. a week. This allows for comprehensive cover for an ancillary user operating in medium-risk areas.
Interest charged at a rate of 5 per cent, on the initial outlay of £813 adds 16s. 3d. a week, giving a total of £12 2s. Id. for the five items of standing costs.
There are similarly five items of running costs, namely, fuel, lubricants, tyres, maintenance and depreciation. Assuming that petrol is purchased in bulk at 3s. 10d. a gallon and an average rate of consumption of 17 m.p.g. is maintained, the fuel cost per mile would then be 2.71d. Lubricants, including both topping-up and refilling of the sump, is reckoned to cost 0.20d. a mile. With a set of tyres costing £70 and an average life of 30,000 miles, the tyre cost per mile would amount
to 0.56d. Maintenance is assessed at I.58d. a.mile, which amount includes allowances for washing and servicing as well as major
repairs. .
In order to calculate the cost of depreciation, the equivalent price of the original set of tyres is deducted from the initial cost of the vehicle, followed by a further deduction in respect of the estimated residual value, here reckoned at 10 per cent, of the original cost. The resulting depreciation cost per mile is then I.59d., giving a total running cost per mile of 6.64d.
Still assuming an average of 300 miles a week, the corresponding running costs per week would be: Fuel £3 7s. 9d., lubricants 5s., tyres 14s.. maintenance £1 19s. 64.. and depreciation £1 I9s. 9d.; total £8 6s. The resulting total operating cost per week is then £20 8s. Id.
Dealing similarly with the oil-engined version of this 30-cwt. van, the initial outlay is now assumed to be £935. Because of a slight increase in the unladen weight, the cost of licences now becomes the equivalent of 12s. Id. a week. The next three items of standing costs, however, remain the same. Namely, wages £9 14s. 104., rent and rates 9s. 6d., and vehicle insurance 10s. 7d. a week. Although one of the factors determining the amount of insurance premium payable is the initial outlay on the vehicle, in the scale of rates in which this cost is calculated value excess becomes operative only above an initial cost of £1,000.
=
BASED on an initial outlay of £935, interest charges will now be the equivalent of 18s. 9d. a week. giving a total standing cost per week of £12 5s. 9d.
It will be assumed that there is a 50 per cent. improvement in the rate of fuel consumption due to the fitting of the oil engine. With the resulting figure of 25.5 m.p.g. and a cost per gallon of 3s. lOid, for oil fuel, the fuel cost per mile becomes 1.83d.. compared with 2.7Id. for the petrol-engined version.
Lubricants are reckoned to cost slightly more, namely, 0.224., whilst tyres remain the same at 0.56d. a mile. Maintenance is now assessed at I.32d., but depreciation is now increased to 1.854. a mile due to the higher initial outlay. This gives a
total running cost per mile of 5.78d. The corresponding running costs per week would be: Fuel £2 5s. 9d., lubricants 5s. 6d., tyres 14s., maintenance £1 13s., and depreciation £2 6s. 3d.; total £7 4s. 6d.
When averaging 300 miles a week the total operating cost for this oil-engined 30-cwt. van would therefore be £19 10s. 3d., as compared with £20 8s. Id. for the petrol-engined version.
In examining these costs it will be noticed that almost half of the total is accounted for by the item of wages, even when this is limited to a basic 44-hour week. Particularly where delivery .work is concerned involving the driver stepping in and out of his vehicle many times a day, any improvement in body design which would facilitate his movements must obviously have a substantial effect on the overall profitability of the vehicle. In this type of work, the total number of deliveries which can be effected during a given period is determined more by the time taken by the driver to make the actual deliveries from a stationary vehicle to the customer, than by the mileage or tonnage involved.
The second major item is the cost of fuel and, as shown here, the fitting of an oil engine results in a saving on this item of cost of £1 2s., even when the mileage is limited to 300. This difference more than offsets the comparatively slight increase in the cost of interest and depreciation of the oil-engined version.
ALSO relative to the item of interest charges, it will be noted that this amounts to less than 10 per cent. of the cost of wages. Because of this ratio, any increase in interest charges due to a higher outlay resulting from improved cab or van
design, should be more than offset by the greater productivity of the driver which it is expected will ensue.
When only one or two delivery vans are employed it is obviously uneconomic to have a reserve vehicle available when the time comes for major overhaul. Apart from hiring a vehicle for that particular occasion, there are two other alternatives, namely, contract-hire on a long term or. if owner'ship of vehicles is insisted upon, a more frequent renewal of vehicles, say every year. In that event the two items of cost chiefly involved would be maintenance and depreciation. Changing vehicles yearly would increase the cost of depreciation. But even if this increase were more than the saving effected by the reduced amount of maintenance which should then be required, the extra availability of the van to earn revenue could result in an overall gain. S.B.