By Stephen Lasky
Unlike other fueling options, universal fuel cards enable drivers to use almost any gas station in the U.S. to fill up their vehicle. While some fleet managers assume there is an added cost for this convenience, compared to discount networks, there can also be potential savings with this type of card product once all fleet costs are considered.
Fuel prices can vary greatly by gas station and brand. Knowing which stations offer the best prices and being able to direct drivers to use those fuel locations can lower company costs. Unlike major oil company cards (e.g., Shell, 76, Chevron, etc.), universal fuel cards offer brand flexibility. Brand flexibility means price flexibility. Drivers aren’t limited to a specific brand and its merchant stations. If there is a better price across the street, they can use that site. By shopping across brands, companies can realize consistent savings, and some card products, like the Voyager card, have mobile apps to help drivers locate the best-priced gas station while on the road.
While shopping across brands can lower fuel costs, experienced fleet managers know the importance of balancing the price per gallon against the opportunity costs associated with operating a commercial vehicle. To understand this balance, you need to know how much it costs your fleet when drivers travel out of their way to locate certain locations or brands. An advantage of universal fuel cards is the ability to save driver time. Cardholders typically can refuel anywhere without having to spend time locating specific retailers. Initially, it might seem that driving a few minutes out of the way is not a big deal. However, driving just an additional 10 minutes to find a specific site, every day, for the entire year, ends up being over 40 hours annually! That’s an entire workweek wasted.
Let’s get more specific about the opportunity costs involved. Of course, there will be differences between industries and companies that make calculating the total cost difficult, but there are known costs of operating a vehicle that we can use to make a general estimate. The American Transportation Research Institute (ATRI), for example, publishes an annual analysis of the operational costs of trucking. In their analysis, they provide the average cost per hour of operating a commercial vehicle. They consider costs for maintenance, insurance, tolls and tires, in addition to wages and benefits paid to the driver. Recently, they estimated the average cost per hour was $63.70. The table below shows a breakdown of that cost compared to previous years.
How does driver time impact fuel costs?
We can use the ATRI per hour cost information to examine a couple of scenarios.
For a company with drivers that travel out of their way to locate a specific fuel brand or station, what is the cost of adding just five minutes of driver time? Using the information from ATRI, we can calculate this:
Fuel Costs: $1.42
- Truck/Trailer Lease or Purchase Payments: $0.87
- Repair and Maintenance: $0.56
- Truck Insurance Premiums: $0.28
- Permits and Licenses: $0.08
- Tires: $0.13
- Tolls: $0.10
- Driver Wages: $1.96
- Driver Benefits: $0.59
- Total Added Cost = $5.98
Driving an additional five minutes adds about $6 per fill up. If your average transaction is 100 gallons, you would need a rebate of more than $.06 per gallon to offset this increased cost.
The ATRI analysis is most applicable to tractor-trailers traveling on highways. Operational costs will differ for companies that rely on box trucks in metro areas. However, we can make some adjustments to better represent the scenario of operating a box truck:
- Fuel Costs: $10.25
- Truck/Trailer Lease or Purchase Payments: $5.75
- Repair and Maintenance: $5.10
- Truck Insurance Premiums: $2.55
- Permits and Licenses: $0.60
- Tires: $0.65
- Tolls: $0.25
- Driver Wages: $21.10
- Driver Benefits: $6.75
- Revised Total Cost per Hour: $57
With the revised estimates above, let’s calculate the cost of adding five minutes of driver time when a box truck is being operated:
- Fuel Costs: $0.85
- Truck/Trailer Lease or Purchase Payments: $0.48
- Repair and Maintenance: $0.43
- Truck Insurance Premiums: $0.21
- Permits and Licenses: $0.05
- Tires: $0.05
- Tolls: $0.02
- Driver Wages: $1.76
- Driver Benefits: $0.56
- Total Added Cost = $4.42
At first glance, it seems that greater fuel efficiency (MPG) and lower operational costs for a box truck result in a lower added cost of driving out of the way to purchase fuel. However, that isn’t the case once we factor in that a box truck has a smaller fuel tank. If your average transaction is only 40 gallons, for example, you would need a rebate of $.11 per gallon to offset this increased cost of driving five minutes out of the way.
Be sure to factor in all the potential costs when choosing a fuel card for your company. If you’re considering discount networks, make sure fuel locations are along driver routes. If not, opt for a universal fuel card. The convenience of fueling at the nearest location can reduce driver time and operational costs, which add up.
Stephen Lasky is P-Fleet’s vice president of support. P-Fleet is a San Diego-based fuel card and payment management solutions provider for commercial fleets, including those with owner-operators. Learn more at www.pfleet.com.