What Does it Cost to Start a Trucking Company Business?
Is a trucking company profitable? How much is it to start up a trucking business? Find out. Like most business ideas, the cost implications for bringing a trucking business idea to fruition always comes up.
We are considering one such question: “How much does it cost to start a trucking company?” We will provide you with all the answers you need to know. Also, we will list some of the basic equipment that contributes to the overall cost.
This will be in addition to any other information that may be relevant to our discussion.
So here is the cost to start an owner-operator trucking business:
Equipment as a Major Expenditure
The major cost for starting a trucking company lies with equipment purchase. The total cost largely depends on the scale of your trucking business. Typically, the larger the scale, the more expenses will be incurred. The opposite is true for smaller sized trucking companies.
Cost of Starting a Trucking Company
Apart from the scale of your trucking company, several things contribute to the overall cost. These include your location or state your business will be located in. Your preferred cargo as well as insurance contributes to the cost.
- Equipment Cost
We mentioned earlier that this where a major part of your expenses will go. This consists basically of the vehicles or trucks to be used. Hence, you need to consider whether you will be buying a new dump truck or leasing one. The decision you make will depend on how much funding is at your disposal.
If you have sufficient funds available for a down payment, you may choose to buy a truck. However, when such funding isn’t available, leasing a truck may be the easiest way out. In the case of the former, you will still have to decide if you will need new or used trucks. This also depends on available funding at your disposal.
New trucks will require less maintenance than used ones. However, the used trucks will still serve your trucking business needs. The condition of purchase determines how reliable they are. An estimate of the cost of a new truck and trailer starts from $110,000 and $30,000 respectively. You can get a new truck from $30,000 and above.
It is interesting to know that financing options are available. These cover different categories of equipment financing.
1. Equipment Leasing
If non of the above fits your needs, then leasing your trucks may be an available option for kick-starting your trucking business. This has its advantages as well as disadvantages. An immediate appeal it has is that it requires little or no down payments.
Depending on your leasing company, some of them lift the burden of maintenance from your shoulder. This allows you to commit resources to other equally vital areas.
The disadvantage of leasing your trucks is that it becomes more expensive than owning your truck(s) in the long run. In any case, it will be much more beneficial if the services of a financial advisor are sought.
- Variable Cost
In starting a trucking company, variable costs are also part of the overall costs you need to consider. These are basic costs that vary. They include repair and maintenance costs, fuel cost, lodging, feeding, and more. These costs are incurred continuously and may vary due to several factors.
Variable costs will change due to the level of activity (patronage or haulage). The higher the activity, the greater the variable costs incurred, and vice versa.
Mileage is a major contributor to variable costs as it directly influences fuel consumption including wear and tear.
- Fixed Costs
As the name suggests, these costs are fixed. They include truck insurance, biennial medical certificate, alcohol, and drug testing, licensing and registration, fuel and toll services, phone and internet, business development, software, and services, etc. These are normally fixed.
However, the cost of these will depend on your location.
2. Forms, Insurance and Licensing
These are among the several requirements that you are expected to fulfill before commencing business operations. Fee payments are necessary. However, there are no standard fees for all states. These consist of the following;
- BOC- 3 Form
This is a requirement for trucking companies that will be doing a lot of interstate travel. This confers a legal authority to transact your business across states.
- The Heavy-Use Tax Form
Under this provision, the IRS (Internal Revenue Service) requires that all trucking company owners fill out this form.
- IFTA Decal and IRP Tags
International Registration Plan tags and International Fuel Tax Agreement Decals are basic requirements for establishing a trucking company. However, these do not have a uniform cost across all states. You will need to find out what your state requires of you.
- Commercial Driver’s Licence
This is a basic part of the requirements for all truck company owners. Commercial driver’s licenses are issued by all states. You and your driver will need to obtain this from your state.
- Registration with the Department of Transport and the Federal Motor Carrier Safety Administration
Registration with these bodies is mandatory. You need to find out what is required of you.
- LLC Registration
This is the business structure to adopt when starting a trucking business. It protects your business and assets from liability.
How much does it cost to start a trucking company has been our focus. We have provided you with ample information on the basic costs as well as other costs you are likely to incur during the business.
As explained, some of these costs differ from state to state. Also, you have available financing options you can explore. This is in addition to leasing companies that lease their equipment to you.