Problems of the
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HAULIER and CARRIER ICHOSE a 2-tonner to exemplify the suggestions I have been making for the maintenance of a sinking fund to cover expenses of operation because it is a popular type, particularly amongst owner-drivers, who are often so hard to reach when disseminating information concerning matters of cost and reasonable charges.
The underlying principle is, however, the same, no matter what the size or type of vehicle. I have selected three others, concerning which I am going to set down the actual figures for sinking fund and current expenditure, referring the reader. to previous articles for a full explanation of what I mean by these terms.
A 6-ton •petrol-engined goods vehicle is an example which will have a wide appeal. Taking, as previously, the figures from The Commercial Motor Tables of Operating Costs (a copy of these Tables can be obtained gratis on application to the Editor), current expenditure, so far as running costs are concerned, comprises 2.50d. per mile for petrol and 0.10d. for oil. These items have to be bought direct.
Tyres are likely to cost 0.85d. per mile, maintenance 1.20d. and depreciation is at the rate of 1.40d. Those are what I call the sinking fund items, and the total running cost is 6.05d. per mile. Of the standing charges, current expenses amount to £4 4s. a week, £3 12s. being for driver's wages and the balance of 12s. garage rent.
The sinking-fund items comprise insurance at 10s. per week, licence at 21 16s. per week and interest at 12s. 6d. per week. The total of the standing charges is B42 any other allowances whatever, let alone profit, is 15s. for the five hours of time, plus 10s. 1d. for the 20 miles of running; total, 21 5s. ld. (More than is. 3d. per mile.) The actual amounts to be set aside and put in a deposit account, as explained in the previous article, are at the rate of 7s. for tyres, 10s. for maintenance and 1 is. 6d. for depreciation per 100 miles. In addition, there is 10s. per week for.insurance and £1 16s, per week for taxation.
For my second example I will take a 12-ton rigid-type six-wheeler with an oil engine. The running costs, in which are included current expenses of 1.04d. per mile for fuel and 0.24d. for oil, total 7.56d. per mile. Standing charges, including current expenses of 23 12s. per week for wages and 14s. per week for garage rent, total £9 7s. 6d. per week.
A vehicle of this type, therefore, costs its owner 3s. 10d. per hour, plus 7.56d. per mile, and the net cost of operation of any job can be calculated from those two figures, given knowledge of the time that it will take, plus the total mileage.
In this case the sinking-fund items per 100 miles are 15s. for tyres, 18s. for maintenance and the same amount for depreciation. In addition, there is from 23 to 23 Ws. per week for the licence, the actual amount depending upon the Unladen weight, and 10s. per week for insurance.
Now, for a change, I will take the case of a motor coach, a 20-seater for example. For this the running costs total 4.35d. per mile, including current expenses of 1.15th for fuel and 0.07d for nil. The standing charges .total 29 12s. per week, including regular expenditure of 26 14s. 8d. for wages (driver and conductor) and 13s. per week for rent.
The equivalent in cost per hour is 4s., so that in calculating a price for
any particular trip the operator can begin by assessing the bare operating costs of his vehicle on the basis of 4s. per hour, plus 4.35d. per mile. A half-day trip, for example, to a place -20 miles away taking five hours, the equivalent of 21, and including 40 miles at 4.35d., which is 14s. 6d., the operator should . realize that the basic cost to him of sending the vehicle on the trip without any allowances for tickets, booking, e.tablishnient expenses and with no provision at all for profit is 21 14s. 6d.
The sinking fund charges per 100 miles in connection with this vehicle are at the rate of 4s. • 6th for tyres, 13s., for maintenance and 10s. 6th for depreciation, plus 14s. 6d. per week for licences and 14s. per week for 'insurance.
• Earlier on in the series I referred to the fact that the circumstance of a vehicle having been acquired on the hire-purchase system had, in the majority of cases, a serious effect on the owner-driver's viewpoint. This must be so, because the owner-driver, starting a business after that fashion, is made to realize at 011Ge that a profit sufficient to pay him a driver's wage is very far from being enough. In the case of the 2-tonner his monthly payments will be about 210.
A curious point arises here. There are many who hold the opinion that the practice of selling vehicles on hire purchase is responsible for a good deal of the
rate-cutting that occurs. My view is that it cuts both ways. It is true that, occasionally, the haulier whose finances are, shall I say, negligible, finding himself with an instalment due and insufficient cash to meet the obligation will take any job at any price so long as he obtains enough to enable him to pay his instalment. In those circumstances hire purchase does bring about occasional cut rates which might not otherwise obtain.
On the other hand, the purchaser is, at the outset, aware that the" driver's wage " idea of profit is no use.
One of the many good points about this sinking fund of mine is that it does provide the haulier with a little balance in the bank.
In the example quoted in the previous article the haulier had, at the end of two months, over 222 in the bank to the eredit of this sinking fund. In an emergency, and only in emergency, he could draw upon it, making a special note on the form which I recommended him to draw up, that a certain amount was borrowed from the sinking fund for hire purchase. The borrowed sum should, of course, be replaced so soon as possible.
It might even be fair, as I know is regularly done even by some of the most experienced and successful hauliers, to allocate the whole of the depreciation sinking fund towards payment of hire-purchase instalments until that debit is cleaned off. There is not a great deal of harm in this, the only point being that unless the amount so borrowed be replaced the acquisition of subsequent vehicles will, in the absence of supplementary funds, have to be made on the hire-purchase system.
This concludes the series on sinking fund and operating costs. I propose to deal subsequently with establishment costs. S.T.R.