AT THE HEART OF THE ROAD TRANSPORT INDUSTRY.

Call our Sales Team on 0208 912 2120

What a Coach Costs to Run

6th June 1952, Page 64
6th June 1952
Page 64
Page 67
Page 64, 6th June 1952 — What a Coach Costs to Run
Close
Noticed an error?
If you've noticed an error in this article please click here to report it so we can fix it.

Which of the following most accurately describes the problem?

IN dealing with the problems which are likely to be encountered by a newcomer to the coaching industry, Ihave so far described the four principal methods of employment of a vehicle, dealing with the matter from the legal aspect. I do not say that there are only four ways in which a coach can be used, but those I dealt with, namely the use as a stage carriage, express carriage, for tours and excursions and as a contract carriage, are the main divisions of the industry. I did not go into detail -ancr refer, for example, to such operations as providing transport for

workers or for schoolchildren. . • •

I have not attempted to recommend the operator to adopt any particular method of use. I think I did make it clear inferentially that having in mind the obstacles in the way of obtaining road service licences for stage or express carriage work, he might be well advised, in the beginning at any rate, to consider first the use of his vehicle as a contract carriage which, of course, requires no road service licence, or for tours and excursions.am leaving him to

decide such matters on his own .appraisal of local . . . . opportunities. .-. .• _ The next thing for the newcomer tp understand is the economics of the subject. I am in a dilemma herd as I am in the dark as to the degree of " newness " of this supposed newcomer. I think on the whole the best thing I can do . is to assume that he is completely ignorant in this matter. . This will involve me in going right back to the fundamentals, but I think I am justified in proceeding on these lines, for even the man who has been the longest in the industry: may,.. find that there are some paints which he has hitherto Over looked. • .

Three Sets of Figures There are three sets of figures involved. There is first the cost of operating the vehicle, second the cost of running•the business (this is usually referred to as establishment

cost), and third the profit which is hoped to accrue from his operations.

All the operating costs are comprised under 10 main headings. If any item of expense has to be met which does not truly fall within the scope of these, it must not be debited against the vehicle. In all probability it will find its true place under the heading of establishment costs, which, as I have pointed out, are really the cost of running the operator's business.

The cost items are:—Licence (Road Fund); wages. (of driver, or driver and conductor, or shift drivers and conductors if the work be such as to ,involve more than one platform crew per day); rent and rates of garage; vehicle and passenger insurance; and interest on capital outlay.

These five items are. standing charges, as they are, within limits, invariable from week to week and, except insofar as wages are concerned, are not affected by the amount of work done. The other five items are:—Fuel; lubricating oil; tyres; maintenance; and depreciation. _These are running costs assessed per mile.

That puts the matter of vehicle-operating costs in its simplest form. Unfortunately, considerations of accuracy have made it necessary to complicate the matter a little, as some of the items, when considered in detail, have to be debited under both headings, that is to say, under standing charges as well as under running costs. That will become clear as I proceed to explain. .

-Knowledge of the operating cost of his vehicle is the first essential to anyone engaged in road transport, and I shall now try and demonstrate to this newcomer how he can; with reasonable accuracy, assess what his vehicle is going US Cost to run. It will be more convenient to deal first with the running costs, A 32-seater coach will probably

A34 return 9 m.p.g. If the operator buys his petrol in bulk he may be paying anything from 3s. 10d. upwards per gallon. If he pays 3s. 10d., then the actual cost per mile is 46d. divided by nine, which is 5.10d.

The cost of lubricating oil will be comparatively little when the vehicle is new, but will increase as the machine ages until such time as the engine undergoes a thorough overhaul. It should be understood that in assessing oil consumption I do not merely mean the expenditure on oil for topping-up, but those quantities of oil which are needed to replenish the crankcase from time to time as recommended by the manufacturer of the vehicle. On that basis I take 400 m.p.g,, so that if a gallon costs 6s., the cost per mile for lubricating oil is 0.18d, £174 for Tyres I come now to tyres, and T am going to assume that this particular vehicle is :equipped with 8.25 by 20 giant tyres. The cost per tyre, tube and flap to-day is approximately £29, so that a set of six will cost £174. What we are searching for, however, is not the cost of a set of tyres, but the expenditure per mile on tyres. In order to estimate what that is likely to.be we inust have a figure for the assumc;! tyre mileage. _It will be quite safe, in my opinion, to take it that a set of tyres on this vehicle will last at least 30,000 miles, in which case the tyre ost per mile, obtainell by reducing £174 to pence and dividing by 30,000, is 1.50d.

I come now to maintenance which is one of the items whichis. split. There is that part of maintenance which is done periodically, like washing, cleaning, greasing and oiling and a. general check. There should also be provision for repainting as and when required. I include repainting because it is an operation which is carried out at specific intervals of time rather than mileage, and if it be based on time it is obvious that it is a standing charge. This part of maintenance is a standing charge and may be put on one side for consideration when I come to this subject.

The other part of maintenance relates to expenditure on repairs, overhauls, engine reconditioning and so on. The expenditure on this work is likely to be comparatively small during the first year, but will grow in the later years of use. For the time being, I can offer the reader only an estimate of what he will have to spend on this kind of work, and I suggest that he should assume that it will cost him at least lid. per mile. That lid. goes down in the running costs.

Depreciation Split

Finally, there is depreciation. There was a time when I insisted that for the purpose of estimating the operating costs of a vehicle, depreciation must inevitably be regarded as a running cost. Of recent years, however, I have come to the conclusion that as these estimated costs may refer to a vehicle covering varying weekly mileages, it is essential for proper accounting to put one-half among the standing charges and the other among the running costs. For the time being I will put off assessing the amount to be debited under running costs and will come back to that item again when I have considered the five standing charges.

The first of these is licence. That is something with which this newcomer is already acquainted and I need only tell him that it will cost 1 3s. 3d. per week, that is if he pays for the licence in one lump sum to cover one year's operation. If he buys his licence quarterly, he must add 10 per cent, to that amount, making it, say, £1 5s. 6d.

On the question of wages, here‘ again there is a wide variation according to different" localities, but at. to-day's figures I think we should set down at least £7 per week. Rent and rates we can take as being 13s., and insurance, including provision for compensation to passengers in case of accident, will to-day cost approximately 30s. per week.

Finally, there is interest; that is the interest on capital outlay involved in the purchase of the vehicle. My correspondent does not tell me what sort of vehicle he has got or intends to buy, and as the difference between the price likely to be paid for a fully equipped 12-seat coach is large, have to make my own assumptions. I have concluded that he is most likely to consider a comparatively lowpriced vehicle costing, say, £2,750. He may, of course, be of an entirely different mind and pay as much as £4,750. On the former assumption, the interest charged on £2,750 at 4 per cent, per annum is £110, which is £2 4s. per week.

That completes the tally of standing charges with the exception of the provision for routine maintenance and half of depreciation. For routine maintenance I should take El 5s. per week. In order to assess the debit against the vehicle for depreciation, we must first assess the life of the vehicle both in years and in miles, Having in mind the type of machine which this inquirer has, or is about to acquire, that is one costing round about £2,750, I think it will be reasonable for the life to be six years. By that mean that it will be six years before the operator feels that he really must dispose of it and buy a new machine— if he can get one—in order to maintain a reasonable standard in the service he gives to his customers, So far as the expectation of mileage is concerned, I think we may assume a life of 180,000 miles. The vehicle has cost £2,750. From that we must deduct the cost of a set of tyres £174, leaving £2,576. I deduct the cost of a set of tyres from the vehicle cost because the depreciation of tyres is already provided for. It is also necessary to explain that take the cost of a set of six tyres and ignore the spare: I do so because the spare is not being used and is not depreciating. There is one more item before I can get all the figures for depreciation. I must make an assumption as to the price an operator will get for his vehicle when, at the end of six years or at the end of 180,000 miles, he disposes of it. If the market six years ahead be the same as it is to-day, he might get quite a big figure for it. However, hoping and believing that there will be no such shortage of vehicles then as now, I am going to assume that he get £376. 1 subtract that amount from the £2,576, the cost of the vehicle less tyres, which leaves me with £2,200 as the basic figure on which to calculate the amount to be debited under the heading of depreciation.

I take half of the amount and deal with it as a standing charge, the other being treated as a running cost. That means that I must spread £1,100 over six years, which is £184 to the nearest pound, and that, to the nearest shilling is £3 14s. per week. That goes under the standing charges. I must also take the other £1,100 and spread it over 180,000 miles, which gives me 1.33d. per mile.

We may now summarize the foregoing and set down the actual total figures for standing charges and running costs, the former per week anethe latter per mile. For standing charges we have: Tax, £1 3s. 3d.; wages, £7; rent and rates, 13s.; insurance, £1 10s.; interest on first cost, £2 4s.; routine maintenance, £1 5s.; depreciation, £3 14s.; the total is £17 9s. 3d. For the running costs we have, in pence per mile: Petrol, 5,10; oil, 0.18; tyres, 1.50; maintenance (repairs, overhauls, etc.), 1.50; depreciation (from above), 1.33; total.

9.61d. • S. T. R.

Tags

Organisations: Road Fund

comments powered by Disqus