View Full Version : Cost per mile
October 24th, 2002, 05:08 AM
With all the wealth of knowlege that exist on the Limo Forum, I am sure there is some one who can answer this question for me as well a help others who are new to the business. What formula do you use to determine the vairable cost per mile to run a Limousine. Do you consider insurance a fixed cost of overhead or do you include this into the vairable cost? I have three used Limousines that I purchased outright for 20K each. Depriciation, fuel and maint, I figure my cost is about 60 cents per mile. Am I on track or am I way off. I consider Insurance as a fixed operating cost and is not figured into the cost per mile.
I have a formula I use to determine a rate for a fixed price run such as a wedding or a airport. It is a little complicated but I think it reflects a fair rate. Here is how it works. First I determine the round trip miles to the Venue. With a wedding, I ad on 25 miles to cover the miles at the wedding. I multiply that by the cost per mile with a little extra built in for profit. I then determine the amout of time it takes me to reach the Venue and return to home base, ad this to the contracted amount of time, multiply that by a predetermined amout per hour, ad the two together and I have the bottom line. It works for me.
David E. Merrill
October 24th, 2002, 10:04 PM
> What formula do you use to determine the
> vairable cost per mile to run a Limousine.
Mainly just include all costs that are variable is the best way. You can get pretty close with costs the longer you are in business and you know about what costs you will have.
> Do you consider insurance a fixed cost of
> overhead or do you include this into the
> vairable cost?
It's hard to get that into a variable formula but you could add up all your fixed cost and come up with a daily Nut you have to make every day just to break even. Once you realize what this is you will start thinking of ways to make it every day or possible lower the daily fixed cost.
> I have three used Limousines that I purchased
> outright for 20K each. Depriciation, fuel and
> maint, I figure my cost is about 60 cents per
Even thought you have no payment in thinking about your variable cost you still have to figure the purchase in. Your depreciation figure most likely coverd it but also add in the cost of buying your next limo. How many miles area you baseing you depreciation on or are you just basing it on time?
We used to just guess how many miles we would get out of a car to come up with a amount per mile to assign. You figure you got a car with 50K miles for $20,000 and you expect to get 100K miles out of it before you trade it in for $8,000. So divide $12,000 by the 50K remaining miles and you get $0.24 per mile.
Then figure out How much it will cost to buy a new car and factor that in. Your new car will cost $30,000 and you will have the 8,000 from the last car so now your current car has to make enough to buy a $22,000 car a few years from now. So once again take that 50K miles your current car is going to go and You get $0.44 per mile
After that factor in your gas, average miles per gallon divided by your best guess of the average price per gallon over the next 3 years. So 14 miles per gallon (120" stretch) divided by say $1.80 per gallon gives you $0.13 per mile.
Then Maintanance cost per mile:
Oil Change $30.00 Every 3K miles = 0.01
Trans Service $60.00 Every 10K Miles = 0.006
Tune up $150.00 Every 20K miles = 0.0075
Tires $600.00 Every 30,000 miles = 0.02
And so on you can get into pretty good detail on this one. If you are out of warranty you want to include what you think will be emergency repairs needed. Maybe $500.00 every 10K miles. (this may vary depending on how good you treat your cars).
So with this fictional situation you get:
$.90 Per Mile
So if I do an airport that is 60 miles round trip my costs are as follows
Variable cost: $54.00
Drivers Cost (2 hours):$40.00
Total Variable cost: $94.00
Now we have not even covered fixed cost or any profit yet but you figure a stretch doing this 2 hour airport would get say 65.00 an hour plus %20 gratuity, so 156.00, so 62.00 left over to cover fixed costs and profit.
What's great is to have this on a spreadsheet so you can play with all the figures to see how they effect your costs for each item.
Once you know your costs you will be less apt to try and compete with all the lowballers out there. Your attitude will become: If they say they can do it for that little I would go ahead and use them since with my equipment and standards I keep I cannot touch them in price, Call me when you are stranded, good night!
October 26th, 2002, 07:12 AM
I don't have anything to do with running a company, but your post made me wonder two things:
>So 14 miles per gallon (120" stretch)
Does this 14 miles per gallon include factoring in times that the limo is sitting running waiting on the customer?
>Now we have not even covered fixed cost or
>any profit yet but you figure a stretch doing
>this 2 hour airport would get say 65.00 an
>hour plus %20 gratuity, so 156.00, so 62.00
>left over to cover fixed costs and profit.
How do you handle gratuity? Does the driver get it all? If so then can you really include that $26 part of the $62 left over to cover fixed costs and profit? Wouldn't it instead be $36 left over?
Again, this is just me being curious here :-)
October 27th, 2002, 08:43 PM
> Does this 14 miles per gallon include
> factoring in times that the limo is sitting
> running waiting on the customer?
Greg, I used that figure because that is what our onboard trip computer figures our MPG to be and that is (usually) waiting for the customer with the engine running. This would vary greatly from customer to customer and company to company. Also Sedans would get much better milage than a stretch overall. I am in the habit of leaving the engine running but many other driver are not so they would get better mileage.
> How do you handle gratuity? Does the driver
> get it all? If so then can you really include
> that $26 part of the $62 left over to cover
> fixed costs and profit? Wouldn't it instead be
> $36 left over?
Maybe your right greg, I just used the standard fact that driver get around 20 an hour (total) and took that off of the total of a standard run, but your right would work either way.