Transport is a business where a rate that is 5 percent too low produces years of hard work and no return, and where the error is invisible until the truck needs replacing and the money is not there.
Rate setting requires knowing your cost structure properly, and the structure has two distinct parts that behave differently.
Fixed costs: incurred whether the truck moves or not
- Finance or lease payments on the vehicle and trailer.
- Insurance — vehicle, goods in transit, public liability.
- Registration and certificate of fitness.
- Transport service licence and compliance costs.
- Depreciation, which is not a cash cost but is a real one — it is what funds replacement.
- Driver wages where the driver is permanent, plus ACC, KiwiSaver at 3.5 percent rising to 4 percent in 2028, and leave.
- Overhead share — yard, workshop, administration, telematics, accounting.
Express these as a cost per available day. Total annual fixed cost divided by the days the truck is genuinely available — which is not 365, and not 260 either once you allow for servicing, CoF, breakdowns and driver leave.
Variable costs: incurred per kilometre
- Fuel, at realistic consumption for your actual work rather than the manufacturer’s figure.
- Road user charges at the correct rate for your configuration.
- Tyres, calculated as cost per kilometre over their real life.
- Servicing and maintenance, including a provision for major component overhaul.
- Adblue, oils and consumables.
Express these as a cost per kilometre.
Utilisation is where rates go wrong
With fixed cost per day and variable cost per kilometre, a rate needs an assumption about how many kilometres the truck will actually do.
This is where most underpricing originates. Operators build rates on the kilometres a truck does when fully utilised, then run at 70 percent utilisation. Fixed costs still have to be recovered across fewer kilometres, and the rate no longer covers them.
Two protections:
- Use realistic utilisation from your own records, not from a good week.
- Account for empty running. A backload at a reduced rate is better than running empty, but a rate structure that assumes backloads you do not reliably get is a structure that loses money.
Building the rate
For a given job: (fixed cost per day × days required) + (variable cost per km × total kilometres including positioning and empty running) + margin.
Then sanity-check it as a rate per kilometre or per tonne against what the market pays. Where your calculated rate is well above market, the question is whether your cost structure is uncompetitive or whether the market is pricing below cost — both happen, and they require different responses.
Fuel and RUC adjustment
Fuel is volatile and RUC rates change. A fixed rate agreed for twelve months without an adjustment mechanism transfers that risk entirely to you.
Fuel adjustment clauses are standard practice in freight contracts for good reason. Where a customer will not accept one, the risk must be priced into the base rate — which usually makes you more expensive than a competitor who accepted the clause.
Note also that road user charges are moving to cover the whole light fleet, and that operators of light commercial vehicles should expect RUC to become an explicit cost line rather than being bundled invisibly into fuel.
The costs most often missed
- Depreciation and replacement. A rate that covers operating costs and finance but not replacement means the truck cannot be replaced without new debt. This is the most common structural error in owner-driver operations.
- The owner’s own labour, where an owner-driver pays themselves what is left rather than a market wage.
- Non-productive time — waiting to load, delays at site, compliance administration. All of it is work time under the transport rules and all of it consumes the day.
- Major component overhaul, which arrives as a large irregular cost and should be provisioned per kilometre.
Measure against actual
Record actual costs and kilometres by vehicle, and compare against the assumptions in your rate. Most operators find one or two costs consistently understated, and correcting the model is worth more than winning another customer at the wrong rate.
Also review profitability by customer. Transport businesses commonly have one or two customers who are, on honest analysis, unprofitable once waiting time and empty running are counted.
Rates and compliance interact
A rate that only works if the driver exceeds work time limits, or if maintenance is deferred, is not a rate — it is a plan to break the law and hope. Both the transport rules and health and safety duties apply, and payment structures that reward distance or delivery count are examined after a serious incident.
NZTA publishes current RUC rates and operator requirements, and Ia Ara Aotearoa Transporting New Zealand publishes cost model and industry guidance for members.
General information only. Confirm current rates and requirements with NZTA.
