• How to Charge for Coach Hire
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IHAVE been asked to deal with costs and charges for the use of a coach on private-hire -work. As one inquirer puts it: "I should like to know how to assess the ratesfor a day's outing by the sia."
He asked for suggestion's as to the charges to be made for mileage, plus that to be made while the coach was waiting
for the party to go. home again.
: . I gave him. the information, but I do not think this was ' quite the right way to deal with the problem. As I see it.-a coach when hired for work of that sort is hired for the day
and should be charged aceOrdingly. That is .. the. way I propose to deal with it in this article.
Broadly speaking, the underlying principles of costing and charging are the same for both goods and passenger carrying. The details, however, are different. Especially is this so in respect of some of the items of cost and with regard to the way in which the charges should be allocated. Moreover, there is a wide difference between the various operators interested in this work.
In the first place, the vehicle itself can he particularly zxpensive in first cost. Competition, especially for the best and most paying class of customer, is keen and imposes-upon the operator the necessity of providing a particularly high standard of comfort, amounting in many cases to luxury.
The vehicle must be attractive in style, design, colouring and the ornateness of interior fittings. All these add considerably to the cost. There is a vast difference in the capital sum needed to buy a 32-seater bus for a provincial bus service and a 32-seater coach for luxury travel on private hire. These conditions, in so far as the higher class of private-hire business is concerned, involve increased expenditure in two ways.
Besides higher initial cost of the vehicle there is also the need for fairly frequent replacement because, where there 1122 is a choice, the customer who is prepared to pay well will naturally select the coach which is most up to date. The combined effect of these tWo factors is, of course, to increase depreciation to a high figure.
Operators in this class may well expect, in the near future, to pay anything up to £3,000 or £3,500 for a 30-seater luxury coath. In their endeavour to keep up to date they dispose of a coach and replace it with a new vehicle at the end of, say, four years. At that time they may expect to get £700 or £750 for the used vehicle. The depreciation on that basis, and assuming seasonal use of the vehicle, may amount to as much as £25 to £30 per week.
Operators who carry on business on these lines will charge rates accordingly and, although it is not difficult, it would be absurd to accept them as being normal or standard. These operators take the cream of the traffic. Nevertheless, there is a good deal of nourishing milk left, plenty for the other operators—perhaps in the majority--who are not inclined to spend so much on their vehicles and may be content to take them, used, from the first class of operator. There is good custom for them at the lower rates.
Among these operators are those who purchase their used coaches for about £700. or £750. I should say that the charges which operators of this class make might reasonably be regarded as normal and, in any standardized rates system, could be taken as standard. Failing an agreement on rates arid charges, the second class of operator is likely to find himself in competition on the basis of rates with the following:—
(a) Operators in similar circumstances in allrespects except that, partly as the result of their own enterprise and because they have the good fortune to be located where such practice is possible, they run, their own vehicles all the year round instead of onlY seasonally.
(b) Large operators, especially those running public services, who have spare vehicles which can be put on to private-hire work from time to time and are subject to lower overheads. Their incidence of standing charges is lower because the annual mileage is comparatively high. In many parts of the country there is agreement on the part of these large concerns, and they will not cut any approved schedules of rates either for private hire or for tours and excursions: It will be convenient to commence the discussion on costs and rates by dealing first with those operators who cater for the higher class of customer and are willing to stand the extra expense, knowing that, generally speaking, they wilt be able to recoup themselves by charging rates accordingly. , I have already stated that the fundamental basis of the assessment costs and charges in connection with the private hire of coaches is the same as with goods haulage. A coach on private hire is usually engaged for the day or, perhaps, for several days. The basis is time, and the mileage may be quite small, at least in comparison with the time engaged.
Cricket Eleven A coach may be engaged, for example, to take a cricket eleven for a distance which may not exceed 30 miles. involving 60 miles of running altogether. but the vehicle will be away from 9 a.m. till. midnight. Or, again, it may be engaged for a cricket tour, taking the side away on a Sunday and not returning until the following Saturday. The mileage covered by the coach in that period may not exceed
150, or, at the most, 200. , In assessing the clist as a basis of charges, therefore, particular regard must be had to the time element, and this affects the allocation of depreciation. If depreciation is assessed on a mileage basis, the operator is likely to earn a meagre profit on such trips as these, whereas, if it is assessed on a time basis he can be fairly. Sure of being recouped and of obtaining a reasonable profit on his outlay. In reference to this class of work I depart, therefore, from the usual procedure and deal with depreciation as a standing charge and not a running cost.
Luxury Vehicle
Take, therefore, the case of an operator who spends £3,000 on a luxury type of 32-seat coach. We will begin by dealing with this important item of: depreciation. 1 will assume that a set of tyres costs £120; deduct that amount from the purchase price and there is left a net amount of £2,880 on which to calculate depreciation. As I have already indicated, an operator of this class will have to buy another vehicle after four years. If I assume that he gets £580 for the old vehicle at the end of that period it leaves me with a sum of £2,300 to work off as the amount for four years' depreciation.
As irr this case I am dealing with seasonal operation, I cannot count on more than 25 working weeks in the year, so that this sum of £2,300 has to be worked off in 100 weeks, which means that depreciation of the vehicle is at the rate of £23 per week.
Other items of cost arc also affected by this short-term use. There is, for example, taxation. That should be about £57 I2s. per annum or £1 3s. 3d. per week. If, however, the vehicle is licensed for only two quarterly, periods, the tax will be increased by 10 per cent. and will thus amount to a shade over £1 5s. per week. Insurance, too, is more expensive pro rata for a short period than for a full year and will be not less than £3 per week.
Garage rent has to be paid all the year round but must be debited against the vehicle for only half that period. SO that if the owner actually pays 15s. per week for this item we must debit the vehicle with £1 10s. per week, The next item is interest. This amounts to £100 per annum, and as it has to be worked off in 25 weeks the equivalent amount is £4 per week.
Finally, there are the establishment costs. Over a full year these will probably total £5 per week, in which amount there is provision for the occasional need to hire other vehicles. For a seasonal operator the net sum is £10 per working week.
Now let us see what we have got. For depreciation. £23 per week; tax, El 5s. per week; insurance, £3; rent, £1 10s.; interest, £4; establishment charges, £10. The total is £42 15s. per week_ Wages can be treated as an extra. The probable amount is £11 10s. per week so that our grand total is £54 55. per week.
Running Costs For running costs the following amounts are reasonably accurate. Assume that the petrol consumption is at the rate of 12 m.p.g. and that the cost of fuel is.4s. 6d. per gallon, the fuel cost is 41d. per mile. Take lubricants at +cl. per mile. Tyres at £120 per set and mileage 30,000 give a figure of approximately Id. per mile. Maintenance costs will be low because in the period during which the vehicle is owned it may not do more than 40,000 miles and it would be safe to assume that the average cost through that period will not exceed Id. a mile. The total of running -costs is thus 61d. per mile.
The fixed charges of £54 .5s. arrived at above should be taken as applying to a 44-hour week and the cost per hour is rather more than £1 4s. Now suppose that the vehicle is engaged on a day's journey involving a total mileage of 120-60 miles out and the same back. The amount of the running costs is £3 7s. 6d. The vehicle is away from thc operator's base for 10 hours, and that at 4s. per hour is £12. The total cost is therefore £15 7s. 6d. Add 25 per cent. for profit, say £4, to make the charge nearly £20.
The cost may possibly be augmented by certain special expenses in order to meet specific services. These are extras and should be charged for at the net cost plus 25 per cent. for profit.
S.T.R.