The Trucking industry accounts for 6% of all full-time jobs in the country. In 2017, the American trucking industry posted revenue that was higher than 150 countries.
This article discusses the steps and costs of starting a trucking business in the USA.
Registration
Cost: up to $1,590 onetime. The first step in starting a trucking business is to incorporate a company. To legally transport loads within the country, a company has to register all the necessary permits. The registration is first done on a state-level. The Department of State can let the applicant know about the availability of the proposed name. If the proposed company name is available, the company can be officially registered with the Department of State. Once the registration of the company name is complete, it appears on the official website of the Department of State.
TAX ID number
Cost: $79 onetime. TAX ID number is a prerequisite to open a business bank account. It is also required to pay taxes at the end of every year. It is basically the company’s registration on a Federal level. The TAX ID number can be registered even if the applicant is not a USA resident. The application can be found online.
MC number and DOT number
Cost: $300 onetime. After registering a company and getting the TAX ID number, the final step is to register for a Motor Carrier (MC) number and a Department of Transport (DOT) number. These numbers are required to legally transport loads in the country and can be seen on the sides of trucks. The truck signs are placed on each side of the truck and include the name of the company, MC number, DOT number, home city of the company, etc. There are other trucking-related registrations that a new business may need. To see a full breakdown and list read our guide on how to start a trucking business.
Purchasing Trucks and/or Trailers
Cost: very variable. After registrations and getting the required permits, the next step towards starting a trucking company is to buy trucks and if needed trailers. Trucks can be bought new, or used. The cost of a new truck varies across truck brands and features. The price of a new truck starts at an average of $113,000. A new sleeper truck costs around $125,000 and a trailer costs around $50,000. Specialty trucks are priced even higher.
Used trucks are priced much lower than brand-new ones. Especially when the business requires specialty trucks like long combination or loggers, new trucks can cost a small fortune. However, a truck purchased at a very cheap price with many years of operation may pose a lot of repair and maintenance costs. A repair done on the road costs 2 to 3 times more than repairs done in the home city.
It is recommended to buy a truck that is less than 5 years old and has been driven for less than 600,000 miles. The average price of a used class 8 truck was $43,808 as of this year. A thorough physical check as well as documentation pertaining to the vehicle’s history should be considered before making a purchase. When trying to decide which truck a new owner operator should purchase be sure to check out our article which discusses the 6 best truck brands for a new trucking business.
Heavy Vehicle Use Tax
Cost: $100 - $550 per year. Trucks weighing more than 55,000 pounds are subject to this tax. Trucking companies are required to file an annual Heavy Highway Vehicle Use Tax Return and pay the applicable tax for their fleet.
Insurance
Cost: $9,000 - $12,000 per year. After the purchase of the vehicle, the next step would be to insure it for the three aspects below:
Physical damage: Covers the full cost of the truck. This means if the truck costs $40,000, then it should be insured for the same cost.
Cargo: Cargo insurance should be done for a recommended amount of $10,000. This is insurance for the cargo that a truck is carrying. If more valuable cargo is being transported then a larger coverage may be useful
Liability: This insurance covers any damage that the truck or driver can cause to a third party.
Insurance that covers all the aspects above costs between $9,000-$12,000 per truck per year.
IRP plates registration and IFTA
Cost: $1,500 - $2,000 per year. IRP plates are specifically used for trucks that operate interstate. All 48 states of the continental U.S. are listed on it. IFTA usually comes along with IRP plates. It is a small sticker that is used to put on the back of the truck. The IFTA is renewed every year as long as the owner pays fuel taxes. The cost for IRP plates depends upon various factors, and should cost anywhere between $1500 and $2000 including an initial IFTA decal cost.
ELD, Trailer Trackers, Dashcams
Cost: Around $950 per year. All three above are good technological requirements for each trucking business. Out of the 3 the only requirement is an ELD, and there are certain ELD Exemptions. An ELD is a device that captures driver’s driving status in compliance with regulations. It helps in the automatic tracking of a driver's hours of service and highlights any violations. A trailer tracker is used to track the location of the trailer and can be used to track the location of the trailer. Lastly, dash cams can be installed to keep a video record of the driving and possibly lower insurance costs. ELDs on average cost $350 per year with IFTA, Trailer Trackers have an annual cost of $250, and Dash cams are another $350 per year. We at ELD Mandate work our best to reduce the price for all three above while having state-of-the-art technology and all the important features. To learn more click here for best ELDs, Trailer Trackers, & Dash Cams.
Hiring Drivers
Cost: Average of $59,925. Another step in setting up a trucking business is to hire a qualified driver. This is especially important when expanding the trucking business. An efficient driver with some experience can really help a new a trucking business. A CDL licensed truck driver with the necessary technical knowledge is a great asset to a trucking company. A CMV driver earns an average annual salary of $59,925. However, the payment made to the driver is dependent on various factors such as the distance of the trip, frequency, long/short hauls, etc. Before hiring a driver, a thorough check of the driver’s background including Compliance Safety Accountability records, moving violations, and DUI records should be carried out. A carrier is also required by law to enroll in a drug program as the owner is authorized to conduct random drug tests on the drivers. A drug program costs around $300 per year.
Running the Business
A trucking company incurs expenses to keep the business working efficiently. These expenses can be classified as variable or fixed.
As the name suggests, variable expenses change depending on the output. A fixed expense is a consistent business expenditure that does not vary as per the level of output. The fixed expenses have been discussed above. Below are a few examples of variable costs for a trucking company.
Variable Costs Trucking
Fuel: Depending upon the distance covered and frequency of the trip, fuel costs can vary from one vehicle to another. A semi-truck is able to run for around 6 miles for every gallon of fuel. The average cost per mile in the USA is $1.82 per mile. This is subject to the vehicle’s mileage and fuel costs.
Factoring fees: A majority of trucking clients tend to pay within 20 days to 1 month after completion of a trip. A trucking company can hire a factoring company to get payment sooner. A factoring company buys the invoice for the load from the trucking company and pays them within 48 hours. The factoring company charges around 3% commission for financing the load.
Tolls: A trucking company provides drivers with an EZ pass. This pass is used so that drivers don’t have to stop at tolls. At the end of the month, the owner receives a statement for the total toll costs. Costs vary from different areas.
Scales: A pre-pass is used for truck scales. This is similar to the EZ pass so that the driver can keep driving instead of waiting at scales.
Permits: There are additional permits for the states of New York, New Jersey, New Mexico, Kentucky, and Oregon. Any trip to these states requires additional permits.
Dispatch fee: Dispatchers work directly for trucking companies by working with both brokers and manufacturers to offer the trucking company loads. The fee is generally charged at a flat rate per load. The fee can be 5-10% per load.
Hotels: On a long haul, a driver may rest in the sleeper-berth, or make use of a hotel – depending upon availability and prior authorization of the company.
Maintenance and repairs: Regular maintenance is instrumental in increasing longevity and maintaining health of the vehicle. Maintenance costs around $16,000 a year, but is very dependent on the truck.
Summary
In summary, starting an owner-operator trucking company in the United States can cost between $100,000 – $200,000. For larger fleets with additional drivers, the costs are multiplied by the number of trucks in the fleet and an additional $59,925 per driver. Although this article discusses the cost of starting and running a business, it is highly subjective to the nature of the business, location of the owner, distance and area of operation, etc. Additionally, a Trucking business, just like any other business is prone to unexpected expenses. The owner has to ensure a financial reserve over and above the other incurred costs mentioned above in case of such emergencies. Keep on Trucking!