Problems of the
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HAULIER am
CARRIER
The Real Cost of Maintenance Explained in an Interview with a Haulier. Making Provision for Depreciation
IN view of the fact that this short series of articles was interrupted by the Special Municipal Issue of The Commercial Motor, on March 9, it may be as well to remind readers that I am trying to persuade a haulier to make his own calculations of operating cost. We have agreed on figures for fuel, oil and tyres, but we are a long way from agreement as regards maintenance.
My friend has intimated to me that he disagrees with the figure of 0.75d. for a 2-tonner (the size of vehicle in which he is interested), as given in The Commercial Motor Tables of Operating Costs. He thinks it is far too high.
By way of persuading him, I have shown him a schedule of maintenance operations as carried out in the ordinary way of business by a garage or service station. That schedule was published in the previous article in the form of a table. It contained 24 items and demonstrated that, if maintenance was to be effected in that fashion, the cost-would actually be 0.94d. per mile. This figure did not carry conviction, and we were no nearer agreement with regard to this item, after the schedule had been discussed, than we were before.
Undertaking Maintenance Work.
" I should never dream of putting all my maintenance work out, especially if it was going to cost all that," was the not unnatural retort of my suggestion that this proof that maintenance could cost 0.94d. per mile could fairly be regarded as an argument in favour of the accuracy of the average figure of 0.75d. per mile quoted in the tables.
"Very well, then, tell me what the maintenance of your vehicle actually costs you."
" That's the point. I reckon it costs me .nothing."
"You're definitely wrong there, and I can prove you wrong. I suppose you think you do all the maintenance work yourself?"
"I do."
"Perhaps it would clear things up a little if you were to go through this list of items and indicate to me those jobs which you do actually perform."
"It would be a good deal easier for me to point out those that I don't do." Be picked out five items, as follow :—Reface brake shoes, fit new clutch plate, 1,arnish the body, overhaul the engine and overhaul chaS.sis and body.
"What about sundries '? " I asked.
"Oh, that means just odd items I can do myself."
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"In that you're wrong. You had better leave sundries I in.' It really refers to sundry items of expense which you are apt to forget. A sparking plug or two, a gasket, a new length of high-tension cable, and so on— small things in themselves, but amounting to a not inconsiderable total in a year.
"Very well, then, now let us see what they cost according to the previous schedule. (New readers should know that these amounts were calculated on the basis of 1,000 miles of running.) For refacing brake shoes, 2s. 6d. Fitting new clutch facing or plate, Is. 1d.
Varnishing body, 4s. Ovarhauling engine, RA. Chassis and body overhaul, Li. Sundries, 5s. The total, is 12s. 7d. per 1,000 miles.
"Novr, if that amount be reduced to pence, the answer is 63Id. Divide by 1,000 and a figure of 0.63d. per mile is reached, and that is the cost of maintenance, supposing that you do the bulk of the items yourself. That's more than you thought it would be, isn't it?" "I should think it is."
The Accuracy of Our Tables.
"You will now appreciate that the 0.75d. per mile, the average figure quoted in the tables, is not really far out. It, for the moment, it be assumed that half of the 2., formers on the road are garage maintained at 0.94th per mile and the other half owner-driver maintained, lika yours, at 0.03d. per mile, the average is 0.785d. per mile, actually considerably in excess of the average figure given in the tables.
"That difference is accounted for by the fact that there is a third method of dealing with maintenance, which results in a cost per mile about mid-way between 0.03d. and 0.75d. There is no need to trouble you with that. It occurs in the case only of a fleet owner, but I think you will agree that The Commercial Motor average figure is not fax wrong."
" No doubt you're right, but how much does that mean I am supposed to spend weekly on maintenance?" " You said your weekly mileage was 400?"
"That's what I expect it will average."
"Then you should reckon on a guinea per week for maintenance." "It's a funny thing—I've never bothered about this guinea a week before, or anything like it."
"You've not been in the business long. Your vehicle is practically new. There will come a time when it will need an engine overhaul. There will come a time, later, when it will need a thorough overhaul and a repaint, and then there are the other jobs which you yourself can't do and for which you will have to pay. It is up to you to make provision now for that contingency. If you don't, the odds are you won't have the money when you need it and one of two things will occur. Either you will put off having the work done and serious • trouble will develop, or you will Italie to borrow the money and pay through the nose for it "And don't forget, if you get this contract and a licence to operate the vehicle on it, one of the conditions of that licence will be that your vehicle must be kept in an efficient state."
"What do you suggest?"
"Simply that you put that amount aside, a guinea for 400 miles, or, if you like, say, 5s. or 5s. 6d: per 100 miles. Place it in the Post Office Savings Bank and don't touch it, except for that one purpose."
"All right, I'll see what I can do."
How to Deal with Depreciation.
"Now we come to depreciation. You should treat that item in the same way as• I have just suggested you trea maintenance. According to the tables, the amount is d. per mile, 4s. 2d. per 100 miles, and I suggest you put that sum away in the Post Office Savings Bank just as regularly as that of maintenance. You might put 10s. per 100 miles into the maintenance and depreciation account, thus establishing a sinking fund.
"If you put that 10s. away as a sinking fund on account of maintenance and depreciation, you will be in a position to arrange not only for your vehicle to be properly maintained in respect of the more expensive items which we have enumerated, but you will be able to purchase a new one when necessary. There is, too, this further point; that your money in the bank is earning interest.
"Now let us see what we have got. For petrol, 1.07d, per mile; oil, 0.05d.; tyres, 0.45d.; maintenance, 0.63d.; and depreciation, 0.50d. The total is 2.70d. per mile. That is the actual running cost of the vehicle."
"Then is that the figure I can use in calculating how much to charge per mile? "
"By no means. There are only five items included. Ten represent the total oust of operating a motor vehicle, so that we have still five more to consider."
"But I know several chaps who are running 30-cwt. and 2-ton lorries for 3d. a mile."
"So do I. But just as many as are doing that are running their vehicles at a considerable loss."
"Well, what are the other five items?"
"No, I'm not going to tell you. You must know. Think them out for yourself."
"Oh, I suppose there is the tax, for a start."
"Yes, that's one."
"Tax and insurance go together, don't they, and I pay about 5s. a week rent for the shed in which I keep my vehicle. But that's only three. There aren't any more."
"What about driver's wages?"
"I'm going to drive the machine myself."
That started another argument, which will have to be held over until the next article, S.T.R.