Working out your cost per kilometre

Fixed costs are in rands per month. Running costs are in rands per kilometre. To price a job you need them in the same unit. The usual way is to turn everything into one number: the cost per kilometre. It is the amount every kilometre must earn just to break even.

Step 1: running cost per kilometre

Start with fuel. Most vehicles show fuel use in litres per 100 km. Turn it into rands per kilometre like this:

Fuel cost per km = litres per 100 km × price per litre ÷ 100

Then work out what tyres and service cost you for each kilometre. Use your own records: what you spent on tyres and servicing over a period, divided by the kilometres driven in that time.

Add the three together:

Running cost per km = fuel + tyres + service and repairs (each per km)

Step 2: fixed cost per kilometre

Take the total fixed costs for the month from Lesson 1 and spread them over the kilometres you expect to drive in the month.

Fixed cost per km = monthly fixed costs ÷ kilometres driven in the month

Step 3: add them together

Cost per km = fixed cost per km + running cost per km

Why the kilometres you drive matter

Running cost per kilometre stays about the same. Fixed cost per kilometre does not, because the same R12,000 is shared over more or fewer kilometres. Look at the same example with three different months.

Example numbers only. In a slow month each kilometre carries a heavier share of the fixed costs, so your cost per kilometre goes up. Be honest about the kilometres you really expect to drive, not the best month you ever had.

Keep it up to date

Fuel prices, tyre prices and instalments change. Work out your cost per kilometre again whenever something important changes, and at least every few months.