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LIGHT VANS
Cost to Run ICONCLUDED the previous article in this series by stating the problem of a haulier who proposed to Lake over the local delivery work of sonic six different tradesmen in the town in which he lived. He was to use a 30-cwt. van running five days per week, and I have shown that the cost of operating such a vehicle running 300-150 miles per week would average £18.
I recommended a minimum profit of £5, which means that the revenue per week must be at least £23, and as there were six tradesmen interested in the venture I suggested thai he charge each one £4 per week.
Further consideration brings to light the possibility. that whereas the greengrocer and the grocer may have many deliveries to make in the week, the oilman or the fishmonger may not have quite so much work to offer. The point that arises is how to allocate the charges so that each trader will be called upon to pay in proportion to the use he makes of the service.
... and the Candlestick Maker There is no difficulty here. Let us suppose that the following is a representative' schedule of deliveries made in any week for the six tradesmen. Assume that for' the baker there are 110 calls, for the butcher 90, for the greengrocer 120, for the fishmonger 90, for the grocer 140, and for the oilman 50. The total is 600 calls.
. Our minimum revenue is to be £23, and the next thing to do is to divide that by 600. The result is 9.2d., and that is the minimum charge per call which the operator must make. On that basis he must charge the baker 110 limes 9.2d., which works out at £4 4s. 4d, per week. For the butcher, whose deliveries in the week under review number 90, the charge will be 90 times 9.2d., which is £3 9s., and so on--£.4 12s. for the greengrocer, £3 9s. for the fishmonger, £5 7s. 4d. for the grocer, and £1 18s. 4d. for the oilman.
It is certain that someone will say that the butcher, the baker, the grocer and the greengrocer Will not be inclined to pay from £3 9s. to £5 7s. 4d. for this service. They will believe it to be more economical to run their own vehicle.
The difficulty here will he that none of these tradesmen really knows what it costs to run a van on local deliveries, and it may be that if I give some examples of cost I shall enlighten a number of local tradesmen and at the same time help this operator by giving him information on which he can base his claim that his service is going to save money.
I have some figures for the operation of a 15-cwt. van by my local baker. His van cost him £620 laevv. The tyres are 5.25 by 17, and a set of four to-day costs 134. 1 decffiet that £34 from the original £620 and we get £586 as the cost of the vehicle without driver. If I assume a residual value of £86, then I must calculate depreciation on a net figure of 1500.
Depreciation-Time and Mileage Splitting that £500 into two, I have 1.250 to depreciate on a time basis, and if I take a period of five years, that is £50 per year or El per week. The other £250 1 spread over 96,000 miles and thus obtain 0.63d. as the half of depreciation based on mileage.
The fixed weekly expenditure will run out as follows: Licence, 8s.; garage rent, 6s.; insurance„ 5s.; depreciation thalf), £1; maintenance (d), nil (since I assume that the man who drives the van will keep it cleaned and oiled); interest on capital outlay, 7s. Total, £2 bs. per week. Then there should be an allowance of, say, 11 per week for overheads and a small proportion of the driver's wages. The full amount of driver's wage is not usually regarded as
chargeable as he is paid the wage of a salesman, and driving the van is only incidental to his main job. This gives us £3 6s. per week for fixed charges. Now for the running costs, which will approximate to the following: Petrol, 2.13d. per mile; lubricants, 0.10[1.; tyres, 0.51d.; maintenance, 0.66d.; depreciation (half), 0.63d., total, 4.03d. per mile.
My baker friend tells me that his vehicle runs about 150 miles per week. The cost of 150 miles at 4.03d. per mile is £2 10s, 4d. The total cost is thus 12 10s. 4d, plus £3 6s. for fixed expenses, giving £5 16s. 4d. per week. The baker, therefore, can well afford to pay £.4 4s, 4d., for by so doing he saves £1 12s. per week on what it would cost him to run his own vehicle.
Where I live, the grocer uses a 1-ton van. He has two shops and a large number of customers to whom he delivers, although he does not do a big mileage, only 160 or so each week.
His vehicle cost him £.720 new. The tyres are 32 by 6 and cost £60, so that the price of his vehicle less tyres is ii660. If I allow £60 as the residual value I get £600 on which to calculate depreciation.
Half the depreciation on a time basis, allowing five years of life, is £60 per annum or £1 4s. per week. The other half, on a mileage basis taking 96,000 miles, works out at 0.75d. per mile.
Running Cost Per Week
His running costs will work out at 4.64d. per mile, made up of petrol at 2.35d., lubricants 0.12d., tyres 0.72d., maintenance 0.70d. and depreciation (half from above) 0,75d. At 160 miles, the running cost per week is £3 Is. 10d.
His fixed expenditure will comprise 10s, per week for licence, 7s. 6d. for garage rent, 5s. 6d. for insurance, £1 4s. (from above) as half the depreciation and 8s. for interest on first cost. If I allow 1.1 5s. for contingencies, contribution to the salesman-driver's wages and so on, I have a total of £4 per week, and a grand total of operating costs of £7 Is. 10d. My haulier friend is proposing to do the work for £5 7s. 4d., so that if he can get the grocer to accept these figures for costs he will prove that he can 'save him El 14s. 6d. per week.
The fishmonger in my district is more modest in his transport requirements. He finds that a 10-cwt. van satisfies his requirements and he is apt to think that it costs him practically nothing.
The original cost of his vehicle was £470. The tyres fitted cost £32, and with a residual value of £58 the figure for calculating depreciation becomes £380, that is £190 each for depreciation on a time basis and on a mileage basis. On the basis of time, allowing five years, his depreciation amounts to 15s, per week, and allowing 96,000 miles his depreciation is 0.57d. per mile.
His running costs amount to 3.12d, per mile comprising petrol, 1.52d.; lubricants, 0.05d.; tyres, 0,48d.; maintenance, 0.57d.; depreciation (half on a mileage basis), 0,50d. He tells me he does 240 miles per week, which I doubt,but assuming that he does, that is £3 2s. 6d. per week for the running costs atone. .
His standing charges comprise tax at 6s. per week; rent, 5s.; insurance, 4s. 6d.; depreciation (from above), 15s.;
interest, 55. 6d.; and contingencies, 15s. Total, £2 11g. The total cost of running his van, if he really does 240 miles per week, is £5 13s. 6d., on which basis the haulier Who is charging him only £3 9s., will save him £2 4s. 6d, per week.
Even if his van runs only 200 miles per week, as I imagine is the case, the running costs amount to £2 12s. The total cost, therefore, will be £5 3s., and he will save £1 14s. per week if be takes advantage of the service of the local haulier.
The oilman in my district does not use a motor vehicle at all, and he would he a snag if he were in the district where this inquirer proposesto operate. However, I gather that the same difficulty does not arise in my friend's district, as his local oilman has alreadyagreed to come in on the scheme. However, I will imagine that the oilman at present uses a 5-cwt. low-priced van, one costing him £320. Making the usual deductions of 125 for tyres and 135 for residual value, I get a balance of £260: £130 of that at four years is equivalent to £32 10s. per annum or 13s. per week for that part of depreciation which is based on time. For the other part, based on mileage, I have £130 spread over 60,000 miles, which gives me 0.52d. per mile on that account.
The standing charges are made up of tax, 6s, per week; rent, 5s.; insurance, 45. 6c1.; depreciation (half), 13s.; interest on capital ontlay, 6s.; and contingencies and sundries, 12s. 6d. Total, £2 7s.
The running costs will be just a little over 21c1. per mile and are made up of petrol at 1.25d.; lubricants, 0.05d-; tyres, 0.35d.; maintenance, 038d.; depreciation (half from above), 0.52d. Total, 2.55d.
Total Cost
If we suppose that this vehicle runs 180 miles per week, then 180 times 2.55d. gives me 459d., which is £1 18s. 3d. The total cost is thus £4 5s. 3d. per week and as the haulier is offering to carry for El I8s. 4d., he should have an easy passage in dealing with that customer. There is no point in going into similar details with the other tradesmen: they will operate l0-cwt., 15-ewt. or 1-ton vehicles and the results will be approximately the same as those already described. If, however, the greengrocer in my correspondent's area is like the fellow in my district, the situation is quite different.
My local greengrocer has a series of shops and he uses his vehicle not only for delivering to his shops and direct to customers, but also for collecting his greengrocery, fruit and flowers from the market. He is in quite a differert category from these others. He uses a 2-ton van and it is continuously employed. He says he does upwards of 400 miles per week, and I am quite prepared to believe that this is true.
His costs will work out something like the following. The initial outlay on the vehicle is £880, from which we take tyres at £84 and residual value at £96 to be left with £700 on which to calculate depreciation. That is £350 for time, and over five years that is £70 per annum, or El 8s. per week, and, divided over 96,000 miles, gives a figure of 0.88d. per mile.
Expenditure of £9 5s. 4d.
Running costs per mile will approximate to the following: Petrol, 2.87d.; lubricants, 0.12d.; tyres, 0.84d.; maintenance, 0.85d.; depreciation, 0.88d. Total, 5..56d., and if we take 400 miles per week as his average, the expenditure per week on running costs alone is £9 5s. 4d.
In assessing the greengrocer's fixed expenses, we must take a substantial amount for driver's wages because this man, although he does act as a salesman for part of his time, spends much of it as a driver. 1 have made an allowance for that in the following schedule of fixed expenses: tax, 12s. per week: part wages, £3 6s.; garage rent, 7s. 6d.; , insurance, 6s.: depreciation, £1 8s.; interest, 11s.; administrative expenses, LI 10s. Total, £8 Os. 6d. Add £9 Ss. 4d. for running costs and we get £17 5s. 4d. per week as the cost to this greengrocer of running a 2-ton van for his own 'purposes.
He is aware of the amount he pays, but is quite content because in making collections and deliveries he saves a large sum in transport charges. He has other reasons, apart from those of cost, to prefer to run his own vehicle. He is able to select his purchases and does not have to rely on the goodwill of his suppliers. He controls deliveries himself and there is less fear of deliveries beieng late. These are some of his reasons and they are sufficient in his opinion to justify the expenditure of a pound or two per week on
the operation of this 2-tonner. S.T.R.