If your trucking income's taken a beating this down cycle, you're not alone

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Updated Oct 4, 2023

Owner-operator business services firm ATBS' midyear update session on September 19 revealed a few different ways the average ATBS client might make up the income loss we’ve seen over the last year and a half -- on average, it’s been an almost 10% decline.

In real terms, though, as ATBS VP Mike Hosted notes at the top of the Overdrive Radio podcast edition embedded below, a 1% increase in fuel mileage would get all of that back for the average owner-operator. In short, there are tangible things that can be done to combat what's been tough times of late, particularly in the spot markets for freight.

[Related: Will trucking turn positive for owner-operators anytime soon? ATBS data analysis points the way]

For the Youtube video version of this week's edition of Overdrive Radio, catch Hosted's presentation in full, complete with dozens of slides charting market data and the firm's operating analysis of the 12 months ending June 30, compared to the prior year. For podcast listeners, you can follow along with all his slides by downloading the presentation at this link, too. 

Howes logoOverdrive Radio's sponsor is Howes, longtime provider of fuel treatments like its Howes Diesel Treat anti-gel to get your ready for winter, likewise its all-weather Diesel Defender, among other products.Things have changed mightily since this time a year ago. Rates are down big-time in the spot market, a little less so but also down in the contract market. Those big negatives have come with at least some positives. With declining demand, used-truck prices are way down, too, and parts and other maintenance difficulties, though not entirely resolved, seem to be getting better.

Overdrive Radio logoSubscribe to the podcast on your listening platform of choice for early access to the weekly Overdrive Radio series -- it drops typically every Friday to the feed and follows here at OverdriveOnline.com and in Overdrive's Youtube and Facebook feeds the following week. You can subscribe for first access via Apple and Google podcasts, Spotify, TuneIn, most anywhere you listen.Hosted breaks the data down among clients who are independents with authority and/or small fleet operators and leased flatbed, reefer and dry van owners, presenting bellwether industry averages against which to benchmark your own business performance.

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A couple things definitely have not changed for the better since last year. Fuel’s recent moves have taken it back to the highest of highs, ever more reason to focus on fuel mileage improvement. And in addition to the long rates tumble, there’s another market-impacting element that’s decidedly worse coming out of the freight highs of the post-COVID period -- the cost of borrowing. The Federal Reserve's interest-rate hikes make new financing much less attractive to anyone thinking of expanding with borrowed money. 

Yet there are indicators that have the folks at ATBS, Hosted included, feeling like we’ve hit the bottom of this market -- quite some time ago, in fact. Though we’re probably going to stay here a while when it comes to rates, for owners who can weather the storm, the bottom line could look considerably better this time next year. Take a listen: 

Owners looking for additional business-planning, analysis and management tips, among a myriad of other topics, can find more in the Overdrive/ATBS-coproduced "Partners in Business" manual for new and established owner-operators, a comprehensive guide to running a small trucking business. 


This transcript is for the video version, which consists of ATBS VP Mike Hosted's Sept. 19 midyear owner-operator benchmarking session in full. Access a copy of slides used in the presentation via this link. 

Mike Hosted: This is a really good time to kind of look at what's going on in the trucking industry, understand what's going on with fuel, and kind of go through the numbers and hopefully we can get you some really good information to make wise decisions about your business and also just to understand what's going on. It's been a crazy, crazy time here in trucking. So we'll get started. My name is Mike Hosted. I've been here at ATBS nearly 15 years now, working with our clients, working with our partners, just trying to create a better life for our clients out there. So for all of you drivers that work with us currently, I thank you for your business. For those of you that are thinking about joining the independent contractor world, hopefully this is good information for you and if you have questions for ATBS in general, I'll have some contact information at the end as well.

So we'll get started. So the first thing I want to talk about, and I know you all have lived this, but I want to talk about the last three years, and what we've been through as individuals and as an industry. It has been insane to say the least. So I want to talk through the last three years and the roller coaster we've been on, the ups, the downs, the crazy changes that we've all had to live through and survive is a good way to put it. So let me just kind of start at the top here. Some of you can see this, some of you can't. So I'll do my best to explain what we're looking at here. But in the last three years, I'll start with spot rates. So spot rates for those of you, most of you're familiar with how it works. So there's really three main tiers in the trucking industry. There's contract freight, which is going to be with major shippers and major truck lines.

So think about the P&Gs, the Walmarts, the major companies of the world that book contract rates for years in advance with a certain truckload carrier, and they do that on a long-term basis at usually really stable rates. So contract rates is the first tier where you've got your major carriers working with major shippers. Next is brokerage rates. And so the brokerage maybe is that contract rate at a major carrier that they couldn't haul, so they put it in a brokerage, and then that brokerage has contacts with mid-level and smaller carriers where the brokerage takes a little bit of that percentage and kicks it to some of their trusted partners. Next is the spot market. And a spot market is kind of the leftovers, right? So the major carrier didn't haul it, the contract carrier didn't haul it. The brokerage at that carrier couldn't get it out to one of their trusted partners, and so they kicked it to the spot market. So that's kind of like the leftovers or maybe the smaller shippers that don't have those long-term contracts in place.

So it's that excess freight that didn't get hold by the major shippers, major carriers, and it's a really good leading indicator of how strong trucking really is, okay. Because if we got a lot of leftovers, if we've got a lot of excess freight at good rates, that means there's an excess of freight and we don't have enough trucks to haul it. And so it's a really good indicator. So in June of 2020, that was right after the world shut down and nothing was moving, right? I mean restaurants closed down, airlines shut down, the whole world kind of stopped except for you all. But with that, there was no freight to haul. So spot rates went to almost an all time low in June of 2020. They were going for $1.65 a mile all in. And so it was just brutal in the spot market because there was nothing to haul. Then fast forward a year to June of 2021, spot rates had more than doubled to $3.15 a mile. So there was just a gluttonous excess of freight that needed to be moved at that time.

And the reason is because we were all locked down. So we had all this money from government stimulus, we had checks coming in from the government, we had PPP loans, we had CARES act, we had all kinds of stuff, all kinds of money flown into the economy, but we still couldn't go to restaurants, we couldn't fly, we couldn't travel. So people were spending that money on home goods. They were buying TVs, Peloton bikes, new furniture, project stuff at home, all kinds of different things they were buying at home, and just think about the excess toilet paper people were buying and all that craziness that was going on at the time. So all that capital expenditure meant trucking went bananas and things went really, really well. So rates went through the roof and it really caused an excess amount of freight for the amount of drivers we had on the road so rates went through the roof.

And then fast forwarded today, spot rates are about 2.25 and I think they've climbed up since I made this slide. We keep seeing spot rates climb up a little bit higher, but they kind of stabilized right about 2.25 a mile. So in June of 2020, we saw all time lows. In June of 2021, we saw all time highs and those all time highs stayed that way for about a year, year-and-a-half. And then they kind of tapered off about 15 to 18 months ago and they've kind of leveled off now here at about 2.25 a mile. So it's been a real roller coaster in terms of rates out there, especially in the spot market. Next is fuel. So rates have been all over the place, fuel's the exact same. So in June of 2020 when the world kind of stopped, I mean there were no airplanes flying, people weren't commuting to work, there wasn't freight to be hauled at that moment so fuel futures were actually negative.

And what that means is oil companies had to pay people to take the oil. Literally they were paying people to take their oil because they couldn't store it, they couldn't get rid of it. Fast forward to June of 2022, so two years later, diesel hit an all time high at 5.75 a gallon. And then after June of 2020, it tapered off, tapered off, tapered off until about May or June of this year, and now we started seeing it go back up again, which we'll talk about more in depth here in a minute. So it's been a huge roller coaster as well. Next is truck costs. So truck costs themselves have fluctuated wildly in this span as well, and there's a lot of good reason for all this. But in June of 2020, the average used truck was about $55,000. So very affordable to get into a used quality truck in June of 2020. Fast forward about 18 months in December of 2021, trucks actually peaked at about $125,000 for a used truck, and there's a lot of reasons for that. One, there was a huge demand for trucks, right?

Rates were so good that we had people coming into the industry trying to get their CDL, trying to get their own authority, wanted to buy trucks so that they could haul this high value freight and make a bunch of money. Not only that, but if you think about it, we didn't have an influx of trucks because all the plants shut down. There was a chip shortage, there was a driver shortage, there was a trailer shortage, so there was no inventory, there were no trucks to buy. So with no trucks to buy, people were bidding up prices higher, and higher and higher. So they went up to about 125,000. Since then, they've really tapered off. So just last month I saw the average used truck is now at about $65,000. So they've gone down about 50% from their peak literally 18 months ago. So again, a huge roller coaster in terms of truck costs. And then not only that, but interest rates. The cost of doing business has changed tremendously throughout this fluctuation cycle.

So the prime interest rate in March of 2020 was 3.25%, very cheap to borrow money at the time, very cheap to buy trucks, to have outstanding payments and things like that. Fast forward to today, the interest rate is 8.5%, so it's nearly tripled since that low back in March of 2020. And to kind of put that in perspective, and I kind of pulled up the most simple example I could think of with some really simple math just to make it easier. So I just took a house and I wanted to use really simple numbers. So this is kind of a pricey house, but a $500,000 house, let's say you put 20% down, so you put 20% down on a $500,000 house, you put $100,000 down, that means you're financing $400,000 left over. So $400,000 at 3.25%, that's about an $1,800 a month mortgage payment. Now you do the same thing today at 8.5%. So the same $400,000 loan at 8.5%, that mortgage payment goes from 1800 to $2,900 a month.

Think about that, $1,100 more a month just in interest you're paying at current interest rates. So that's really impacted the way that people do business, right? It's more expensive to borrow money, it's more expensive to invest in your business. So it's really kind of changed the dynamic of trucking and it just shows the roller coaster we've been on over the last three years here, and hopefully we're going to start to see some stabilization here in the near future, but we'll talk about that here in a second. So all this stimulus money, all this truck shortage, part shortage, labor shortage, driver shortage, trailer shortage, stimulus money, all that, lack of trucks, interest rate fluctuations, fuel fluctuations, I mean it has been a roller coaster that we've all been through. Hopefully we're at the end of this rollercoaster and we're starting to see some stabilization, which I'll talk about here in a second. So again, I just want to reiterate that it's just been wild the last three years and those of you that are still in it, we got some positive news for you I think for the first time in a while.

So the first thing I want to talk through here is what is the economic environment in trucking right now? And it has been, again, a rollercoaster. So this chart here is a really interesting chart and it's really powerful as well. This is the Truckstop.com broker load versus truck index. And so on the left here we have the number of loads per one truck looking for a load in the spot market Truckstop.com. We have the number of loads and then I also have the true rate in here after we back out the fuel surcharge. So I'm going to back out the cost of fuel and I'm going to get that true rate to you to understand what rates actually look like. And so you can see over time back in 2018, things were really good in trucking in 2018. After we back out the fuel surcharge, rates were up to 2.42 a mile in the spot market and there was about 75 loads for one truck looking for a load. 2019 wasn't a great year.

We saw in early 2020 when the world kind of fell apart that those rates went down to, all the way down to 1.54 after we back out the fuel surcharge and there were only about 20 loads per truck. So really, really good in 2018, went way down up until the early 2020. And then we just saw an explosion of freight into the spot market where we kind of peaked at the end of 2021. We were seeing about 230 loads per one truck looking for a load in the spot market. And even after we back out fuel, we were seeing rates at about 2.74 a mile. That's just average rates. I know you all were seeing better rates even than that. Then fast forward a little bit further and we fell off a cliff in about April, May of 2022, and we kind of bottomed out in late 2022 and we're going to see this as a trend where we really hit that bottom at the end of 2022, early 2023.

Now I'm not saying we've gone up since then, but it seems like we maybe hit the bottom and we're kind of stable right now and we're going to see that trend. So the cool thing for me is we keep seeing that spot market inch up week after week right now. And again, that's a really good indicator that the trucking market is balancing itself out now. And so we've stabilized ourself at about, I think we're up over $2 a mile now and about 70 loads per truck this week I saw. So we're seeing more freight get put in the spot market, meaning there's an excess of freight with contract rates and at brokerages, and it's being put in the spot market. So it's a really good sign that we hit the bottom a while ago, and that doesn't mean we're coming out of the bottom, but that means we should be pretty stable with rates going forward. And I'm going to reiterate that because I have lots of evidence that's going to show that. So really good sign in the spot market.

The other thing I'll point out, I'll back up here is that prior to the pandemic, our floor was about $1.60, $1.65 after we back out fuel. We've kind of set a new floor. So our new floor looks like it's about a $1.90 a mile after we back out fuel. So it's a good thing while we have gone down, it looks like our floor is maybe a little bit higher than it's been in the past. So that was the spot market from Truckstop.com. The next thing I want to look at here is the CASS Freight Index. And so Truckstop.com again is spot market. That's the excess freight that wasn't with major shippers, major carriers, things like that. The CASS Freight Index is going to be a measurement with those major shippers, major haulers, and so it's going to lag behind. And so this is the number of shipments and what I want to look at here again is trends over time, and on these blue line graphs here, you see in 2018 freight was good.

It was up, up, up. 2019 was a tough year, so freight volumes went down, down, down. So this is the amount of freight moving and then early 2020 of course fell off a cliff because there was nothing to move. And then end of 2020 through 2021, we saw all time highs in the amount of freight being moved. And really since about mid-2021, we've been pretty stable, meaning the amount of freight being moved since mid-2021 hasn't really changed a lot. It's been fairly stable in terms of the volume of freight that has moved. The thing that we have to remember here is that we weren't adding capacity at that time because we couldn't get trucks, we couldn't get trailers, we couldn't get drivers, so rates were staying high because we couldn't add capacity. Normally when we need capacity in trucking, we flood the market immediately and we ruin the good market. Because of all these issues we couldn't do it. So we saw a really long high and with that is now coming an extraordinarily low unfortunately. So that was the amount of freight being moved.

This graph here is going to show us true rates. And so this is going to show us are rates going up or are they going down with major shippers? And again, there's a lag here behind that spot market. That spot market adjusts really quickly to marketing conditions. This is contract freight, meaning the contract has to be negotiated so the major carriers out there have to negotiate with the major shippers and set a new contract rate. And it takes time and there's a delay in that process. So again, in 2018 we saw rates were really good, 2019, 2020 we saw rates go down. And then after that we saw the biggest boom we've ever seen in terms of true rates and the longest boom we've ever seen in terms of true rates. And then about the end of 2022, again, we fell off a cliff. But I'm going to tell you again, I think we're stabilized now and myself and Todd, Jeff and Matt Amen here at ATBS have been speaking with a lot of the major carriers out there over the last many weeks trying to figure out what's going on.

And most of the major carriers in the country say that they have stopped negotiating lower rates. They're at their floor, they're not going to go any lower. And that's pretty much synonymous across the major trucking world right now is that we're at the floor. And again, there's going to be more evidence to go through about that, but it seems like while it's been a brutal last 15 to 18 months, I do believe that we are now off the floor and I'm going to show you more slides to kind of talk about that here in the future. So again, I do believe there's good news here. This is a new slide that I've added this time. And so the red line is going to show us spot rates and the blue line is going to show us contract rates, and we're going to look at this over time. So 2014, 2015 on this red line we had a good year and then we kind of fell off.

And again, that blue line always lags behind because there's a negotiation period with contract rates afterward. And so what I want to point out here is again, 2018 great rates up, up, up, up. And then we kind of fell off a cliff in 2019 through 2020, down, down, down, and then up. And so we have really consistent measures here with how long the highs and the lows stay there. And so the really cool indicator here is in 2020 we went up, up, up, up, up, and then in 2022 we fell off a cliff. Each one of these lows I have circled here, indicates that that's where we hit the low. And then we generally have about six to 12 months of downtime meaning hey, we hit the bottom and it looks like we hit the bottom a while ago. So we hit the bottom, we're going to stay at the bottom for a while, but things aren't going to get much worse, right?

Same thing here in 2019, we hit the bottom, we stayed at the bottom, things didn't get much worse, and then we shot up. Well guess what? We hit the bottom and we hit the bottom a while ago actually, I'll show you here in a second. And so if history repeats itself, which it usually does, anybody who knows history knows that history does repeat itself frequently. If history is repeating itself again, this indicates that we've already hit the bottom and that we're fairly far through our bottom process. And again, we should expect things to hopefully get better. Probably not this year, probably not early next year, but maybe end of first quarter, second quarter next year is when most economists, most people that work for ATA that look at these futures are expecting things to hopefully start to turn around early next year. So if you're surviving now, hold on because we're probably not going to go lower. But again, if history repeats itself, we should be getting better hopefully early next year.

So here at ATBS, we have the privilege of working with you all, so many drivers out in the industry kind of seeing what's going on with you on a daily basis. But we also work with a lot of fleets to get you all discounts to try to see what's going on and get a really good handle on what's going on in the industry. And so I did a survey with most of the major fleets out there and I just kind of wanted to go over some of the things that the fleets are telling us right now in terms of trucking. So we surveyed about 200 fleets, about half of them responded, and these are the aggregated responses I got from some of the major fleets out there. So one thing that we've noticed and that most of the fleets have noticed is that owner operators that entered the market or purchased equipment during that boom freight cycle, so from about mid-2022 to end of, mid-2020 to mid-2022, in that two year time span, they have struggled mightily and have left the industry, left for local jobs, company jobs, things like that.

So they came in when freight was on fire, they came in when trucks were wildly expensive, and they entered the market and they kind of took it as, hey, this is how things always are. And so when things got tougher, they didn't know how to operate their truck in a down market. And we've seen a lot of those new entrants leave the market really quickly because they came in at a great time and didn't figure out how to run their business correctly for downtimes. Trucking's very cyclical. So if you can run in downtimes, you can really run well in great times, and you have to be able to prepare and hedge for all of that. Another thing that was set is truck repairs, specifically DAF systems, plus breakdown time and inflationary costs have been the biggest hurdle and we see that here at ATBS too. Major mechanical failures are the number one cause of IC failure time and time again.

And it's not that you all don't have enough money saved for the repair, it's that the downtime, the home bills, everything that's involved with all that downtime now really, really inflates the cost of a repair bill. And I know that you all know this better than anybody, but you go to the shop and maybe it takes you two days to get in because they don't have enough trained mechanics. Then they don't have the parts so you got to sit there and wait for the part. Then you have to wait another day or two to get through. I mean, it is a process now. And so it's not just the repair itself, it's the downtime that puts people out of business. And we're going to talk about maintenance savings here a little bit more after this, but it's a big deal and the number one cause of failure so we'll spend more time on it. Freight rates will start to rebound as we continue to see capacity shrink. We're already starting to see that. I'll talk about that here in a second. But we're seeing capacity shrink.

That's a good thing for you all that are still doing this. The next one is a quote by the CEO of Knight-Swift, Dave Jackson. We're now over a year into the freight down cycle with an unusual combination of dynamics that work to create a particularly difficult operating environment. I don't know that we've ever seen freight demand fall this far so fast for so long without an accompanying economic recession. And I find that really powerful and really interesting, and I'm going to explain it here more in a second. But I mentioned earlier when we have a good freight market, we flood the market with capacity really quickly and it kind of ruins rates, right? Because there's too many trucks and not enough freight all of a sudden. Well this time we flooded the market, but it took us two years to do it because there weren't enough trucks, there weren't enough drivers, there weren't enough trailers, we weren't putting drivers through school.

There was just a lot going on because of the pandemic. Truck prices are now down low enough too. This last point, truck prices are now down low enough where drivers can build equity quicker, which could help turn around the IC market. And again, we just saw that truck prices have dropped dramatically in the last year-and-a-half. I believe I saw in transport topics just recently that were 25% down year-over-year and we're like 50% down since the peak. So really encouraging signs here. Again, it's not perfect, nobody likes to be in this kind of downmarket, but we're starting to see some encouraging signs. So always like to talk about the driver career journey. And I'll be real quick at this. You all are in some portion of this journey, but generally you go to driver school, after that you go through training and then the next logical step is you become a company driver to kind of figure out the ropes.

Then the next step, probably a lease purchase has a high failure rate, but a really good way to get your foot in the door. You don't need a big down payment, but you can start your own business and kind of start your fleet and move on. The next step for most people is you go buy your own truck, but you like that comfort to work for a motor carrier. You like their discounted insurances, their discounted fuel, their freight network, their choice systems, things like that. So you buy your own truck, but you hook it onto a carrier because you like that network, that comfort. The next step is to become a loan ranger. That's a go get your own operating authority, go to DAT, go to truck stop, go to some load border TMS and start booking your own freight and kind of controlling your own destiny. With that comes hurdles. You got to get your own insurance, your own trailer, all that stuff. And then the next step is what we call a trailblazer.

That's to start adding trucks to your fleet, right? You want to be the next big thing. So during this boom cycle we saw from June of 2020, to June of 2022, we saw drivers go from the left side to the right side in a hurry. We saw people that had never had any experience going out and buying two, three, four trucks, getting their own authority and flooding that spot market to chase those rates. Well, since about May or June of last year, we've seen a big shift from right to left where people are selling their trucks, people are moving their trucks on to major carriers, becoming company drivers, leaving the industry altogether. So it's really cyclical and moves with the industry and it's been interesting to watch here the last couple of years. What I'll tell you is again, we saw a big shift with people moving their trucks from the spot market to fleets. And so we didn't lose capacity fast enough because they just moved, and it's caused rates to go down, but we're starting to see that capacity drop out.

So let's get into the details here and talk through what's actually going on, that kind of sets the stage of what's happened. So this is really interesting data and we're going to look at year-over-year trends now. So one thing I want to start with though is we asked our fleets what are the biggest obstacles to fleet growth right now? And I'll tell you 18 months ago it was driver shortage, truck shortage, trailer shortage. Now it's softening freight markets, economic slowdown and interest rate hikes. So the dynamic has really changed in terms of what fleets are struggling with right now. So let's look at revenue analysis first. And if you can see this, the trend lines are what I want to focus on here. We're looking at year-over-year averages. So what I'm doing is I'm taking this last 12 months versus the 12 months prior to that and comparing the averages. But if we want to look at trends here, if we start with the black bar graph all the way on the left, so that was July two years ago.

We see miles go down, down, down, down until June a year ago, July a year ago, the other colored bar here, we start to see them going up again. So we're starting to see drivers work a little bit harder. They're going to have to run a little bit more to make that extra money, which we'll get into here in a second. But miles, the average IC is now running about 87,000 miles a year. And if you look at this chart here, it's really powerful. So it's very old, it's a 20-year-old chart because we track all these details, we're an accounting firm. But if you look, when freight gets really good, drivers tend to work less and why wouldn't you, right? I mean it makes sense if you can make the same amount of money and you can take more time off, go home to see your kid's sports game, the ballet or whatever your kids are doing, spend some time at home, you do that, right?

If you're making really good money and you can work four or five days a week and get more time off, it's a quality of life thing. So in 2008, things were really good in the world and then the great recession happened in end of 2008, early 2009. So miles were down, down, down. And then freight got really tough. So drivers respond, you all are smart. You know how much money you need to make. If you got to take that extra load, you go do it because you got to pay your bills. And so every time we see an economic recession or a freight softening market, we see miles go up. Fast forward to 2018, freight was readily good, miles fell off a cliff. 2019 freight was tough and they started going back up again. And then we had that two year boom where freight was just on fire and we just saw miles fall off a cliff. And now we are again starting to see them go back up because drivers are responding, they're working harder, they're taking that extra load because they need it.

Revenue per mile is down, rates are down. And so you all have to work a little bit harder and that's just the way business works unfortunately. When things are tough what do you do? You dust off the boots and you start working harder and you all are responding in the right way, which is great to see. So when I look at it on a five-year outlook, again, we were really stable for years here where the average IC was running about a hundred thousand miles a year. Then things got really good in trucking and we just fell off a cliff and at the end of last year we bottomed out at about 85,000 miles annualized, and we've started going up since then. And we're going to see this is a really positive trend for you all that that one extra load that you're taking is really going to start impacting your net income in a positive way. And I'll dig into that here in a minute. So revenue per mile year-over-year is actually up, but the problem is that has to do with fuel surcharge.

And so when I look at it on a trend line, again, if I look at this black bar graph, we went up, up, up and then April of last year is when fuel spiked, revenue per mile spiked and it went up to an average of about 2.30. And then a year ago we started going down, down, down. And right now I was seeing about an average of $1.85 a mile. That's about the average revenue, that is going up right now as the fuel surcharge goes up. There's just about a week delay in that. So it is going up now in a positive way for you all, fuel is more expensive, but that shouldn't matter as long as you're getting that fuel surcharge. And we'll talk about that here in a second. So I added another chart this year because it's just really interesting to see what's going on with the net revenue per mile. So that last chart showed us the average revenue per mile. This, I'm going to look at the net. So I'm going to back out that fuel surcharge and see what the true rates are.

And again, 2018 we saw a good spike. 2019 we started seeing it go down slowly and then that boom freight cycle happened where we just saw revenue per mile go up, up, up, up, up. And then about May of last year since then we've seen revenue per mile go down even after we back out the fuel surcharge. But again, I'm here to tell you I believe that we've hit the bottom there. I really do believe we've hit the bottom in terms of revenue per mile and we're going to start to see a lot of stabilization over the next six to nine months. So we should be at the bottom if history again repeats itself. And so here's another look at the same thing where we kind of peaked in April or May of last year, that's when fuel spiked, inflation spiked, everything kind of like that happen. And we've seen rates kind of precipitously go down since then. So what does that mean? What does it mean for you all?

Should you run in the spot market? Should you run for a fleet? I'm going to look at what it costs to run for the average fleet versus running the spot market. And so here at ATBS, we believe it takes about 50 cents more a mile that you need to earn to go running the spot market versus run at the average motor carrier. And that's average. There's some really good carriers out there where you are going to get more than that and this breakeven is going to be completely different, but it's a good rule of thumb. So to go run the spot market, you have to get your own licenses, permits, you got to do your own IFTA. We think that costs some money. We know it costs some money. You have to buy additional insurance. We believe that's about 12,500 a year more. It's probably actually more than that, especially for your first couple years because you don't have a history. So your first couple years of getting your own authority, insurance is expensive.

Not only that, but you got to buy your own trailer, right? I mean you don't have a trailer pool, so you got to buy your own trailer. You have to book, bill and collect your own loads. And then probably the biggest thing that people don't think about in this is the operational losses that you have. When you work for a motor carrier, you got a lot of drop in hook freight, right? You go, you back into the dock, you unhook and then you go grab your next load. If you're in the spot market, if you're doing your own thing, when you back up to that dock, you got to wait, you got to wait for them to live unload it, then you got to wait and you got a trailer over, wait for them to live load it. That's a lot of operational hours you're losing. So that's probably the biggest expense to you. Anyway, we think it costs about 50 cents more a mile to go run the spot market versus the average motor carrier.

So this chart shows us is it more beneficial for an IC to go run in the spot market or is it more beneficial to run it at a motor carrier? And you can see over time it really holds true. In 2014 it was a good year, you could really make money in the spot market, things went down. 2018, a great year, good to run in the spot market, 2019 down. And then we had a two year run here where being in the spot market was wonderful. It has not been wonderful for the last 15 or so months. And so when I look at it on a closer basis here, this is zoomed in since 2020 on. So again in 2020 that's when the pandemic hit and we fell off a cliff. It was the toughest it had ever been in the spot market, but then we had the biggest boom we've ever had. So generally speaking, when the spot market gets good, it's good for like six, nine, maybe 12 months. Because what happens is we flood the spot market with capacity and it drives the rates down, right?

Because we flood it with trucks, everybody's out chasing it. We couldn't do it this time. Again, there wasn't trucks, there wasn't trailers, there weren't drivers coming through school, so we couldn't flood the market. And so rates stayed high for an extremely long time where at the beginning of 2022, rates were $1.36 higher in the spot market versus the average motor carrier. While it only cost you 48 cents to get there. So that leaves you with a net profit of 80 cents more a mile that you could make in the spot market, almost 90 cents more a mile that you could make in the spot market versus running for the average motor carrier. Then craziness hit in early 2022 and we fell off a cliff, and we bottomed out at the end of last year.

And I want to keep reiterating that we bottomed out at the end of last year where you could only make about 10 cents more a mile in the spot market versus the average carrier, but it cost you 50 cents to get there. So you're at a net loss of nearly 40 cents a mile being in the spot market. Now, a lot of people did survive it because they had good relationships, they had built relationships with brokers, with shippers, with things like that where they didn't get impacted as much, where they had good relationships and they built on that. And so yes, a lot of people left the spot market and went to carriers, but it's really a relationship business right, and those that had built those relationships and weren't just running off load boards were able to stay in the spot market and are still surviving today just fine.

But again, we kind of bottomed out in November, December of last year and since then we've seen a steady attrition, a steady tick up not only in terms of the amount of freight but the rates as well where we're getting closer back to that breakeven, meaning we're almost back to equilibrium and trucking is stabilizing itself as we speak right now. So really good sign there. This is another new slide that I've added, and this is again from some help with the folks at DAT. This is a really cool slide, and I've never seen this one and it's really powerful to me. And so this is going to show us the net new entrance, the new motor carriers into the marketplace. And so this shows us that trucking is very stable over time until we hit the pandemic. And it should be right, because the economy is always growing at two to 4%. So trucking is always growing at two to 4%, meaning we should be adding carriers at a two to 4% rate every single year, right.

And that's what was happening in 2014, 15, 16, 17, 19 happened, in early 2020 happened and this black line shows a contraction, meaning capacity was leaving the market because there was no freight and there was a lot going on. And so when good years happened, like in 2018, we have a brief blip of capacity being added. Well, 2020 happened, the pandemic happened and we started adding capacity like crazy. We've never added this much capacity for this long or even close to it. And if you remember from that chart earlier, in 2021 right here when we were at peak of adding capacity, shipments stabilized right here. But we kept adding capacity for another year and that capacity finally caught up with us in 2022 and it caused rates to fall off a cliff. And so again, this usually happens a lot faster in these cycles, but it didn't this time because of all these hurdles we've discussed. And so again, usually when we lose capacity, it's really brief.

Well, we are now 12 months in to losing capacity at the fastest rate we've ever lost it. And so again, that means people are going out of business, they're moving their truck out of the trucking market, they're moving it to carriers, things like that. And so it's the biggest up we've ever had. Now we're getting followed with the biggest down we've ever had or that we can remember. And when things feel good for that long, it's really hard when they feel bad afterwards. And that's kind of what we're experiencing and what we're in the middle of now. So this capacity leaving again is a really good thing for those of you still in the industry, still making it out there because this capacity leaving means rates are going to stabilize and as we continue to see it leave, that means rates are eventually going to tick back up because we've seen that freight has been stable in terms of the amount of shipment. So this is just the market stabilizing itself is all we're seeing right now. All right, so we asked our fleets, do you pay by percentage? Do you pay by mileage?

About 60% pay by percentage, about 40% mileage. That's pretty stable out there. In really good times, percentage pay is amazing and drivers make great money. In tougher times, some of the mileage fleets tend to be more stable. Everybody has their own home they like to be at. I see drivers successful everywhere they're at right now regardless of the tough rates. So I think it's very important right now to know that rates are down everywhere and the grass isn't greener no matter what you hear. And we'll talk about that here in a second. So there was a lot of questions about the freight, before the webinar I was reading through all the questions, and again, I thank you all for posting those questions. There was something like a hundred of them. I bet 50 of them were asking what's going to happen with freight rates? When is freight going to bottom out? And so we've already talked about it a little bit, but we asked all the major carriers out there, when do you think the freight market is going to bottom out?

And you can see the vast majority of the major carriers out there think either it already has, it's going to bottom out in the third quarter, the third quarters almost over, or it's going to bottom out pretty soon. And again, I can tell you that myself, Todd, Jeff and Matt Amen, our owners here at ATBS have talked to about a hundred carriers here in the last few weeks. And the general consensus is that we have already hit the bottom. The bottom is there. While we're not going to see vast improvements, probably Q4 or Q1, we're not going to see big declines. And again, we're seeing pricing models at major companies say, hey, we've hit the bottom, we're not going to go any lower. This is where we're at, right. So good news in my opinion there. We also asked, what do you expect to happen to freight rates here in the near future? And if you see the vast majority of carriers think they're going to stay flat or only fluctuate between one and 3%. So again, this was three months ago.

Since then, all the carriers have told us they aren't budging. We've hit the bottom, this is as low as we can go. We can't operate at any lower of a rate. So I do believe rates are at the bottom. We're going to see them stable there for a while, but it seems like we bottomed out. So great questions everybody for asking that, but it's good news in my opinion that we have finally hit the bottom and we probably hit it a little while ago, right. So gross revenue, it's pretty flat year-over-year, about 2.5%. I won't spend a lot of time on that, but the average IC is right at about 180,000 in terms of gross revenue. All right? So that's what's going on with revenue miles, things like that. Let's talk about costs. We've got about 20 minutes here, so we'll get through it. And then I have some more questions that some of you asked, I'll answer at the end. But fixed costs, let's talk about fixed costs. Fixed costs are up 5% year-over-year, kind of expected.

What I'll tell you though is we follow this black line, black line, black line, and then we follow the other colored line. We are starting to go down in fixed costs per mile. So fairly stable though, about 60 cents a mile is what we're seeing for fixed costs. Variable costs are also up 6.5% year-over-year. But what I want to emphasize here again is this trend line. So if we follow the black line, black line, we peaked a year ago, June a year ago, $1.50 a mile in variable costs. That was when fuel was at the all time high. Since then we've gone down, down, down, down to variable costs being about 70 cents a mile. Now that has gone up since June. I know fuel's gone up. I watch it every week. I know you guys see it, feel it every week. But we have gone down in variable costs, not only in fuel from a year ago, but we're starting to see maintenance costs go down a little bit as well, which I'll touch on here in a second.

So really good news, revenue stabilizing and it looks like costs are starting to tick down. So we're starting to see the market really stabilize for you all and I really think that's a positive sign. So same trend line here. A year ago we saw average cost per mile at $1.65. We're running about $1.30 right now. So the cost per mile to run your asset has gone down about 35 cents year-over-year, which is really good news. Again, I know it doesn't feel like it because we're still in this down market, but we're starting to see positive signs, and if you make the adjustments to your business now and can survive now, when things get better next year and you have those good practices in place, you're going to be set up for record profits. And again, I'll show you that here in a second. So fuel costs, again, follow these trend lines. They went up, up, up and then since July of last year, we've seen them go down, down, down. The last couple months we're starting to go back up again.

So definitely not fun there, but luckily that's your most controllable cost. So let's look at fuel mileage over time. We saw a big boost in fuel mileage. If we look at this top graph here, we saw a big boost in early 2020, never seen fuel mileage go that high and we couldn't figure out why for the longest time, we finally got our hands around it. That was because there was no congestion on the roads and you all that were driving at that time, you remember. Nobody was commuting to work, there was no congestion on the highways, you could just get out and run. So you got good fuel mileage. We always see it go down in winter months. There's winter blend fuels, idle time's up, so we always see it go down. But then we saw it really stable from 2021 to 2022 on. And that surprised me, right? I mean I thought when fuel spiked in 2022, we would've saw fuel mileage go up to make those adjustments, but we didn't. And that's because rates were so good that you all could afford to still go run hard and chase those rates.

Well now that rates have gone down, we're finally starting to see you all react and get better fuel mileage because you have to to make that money. So if we look at it from a micro scale, again, that same trend line, we're seeing this year in 2023, our average IC fuel mileage has been going up month after month. And I'm going to show you that makes a really big deal. And if you haven't started making adjustments, please do it. We'll talk about it. But truck payments continue to go up over time. It really stabilized during the pandemic here, we kind of saw a flat line here. That's because you all weren't buying trucks. You couldn't, they weren't available, they weren't for sale, they were overpriced. It was very difficult. So trucks were hard to come by. We're starting to see prices go back up again in terms of average payments. And that's because you all are finally able to replace your trucks. There's inventory available so you can finally go replace your truck if you need to.

Some interesting information about trucks as well, we're seeing the biggest orders in trucks we've ever seen right now on a month over month basis. There's a couple reasons for that. One, major trucking companies couldn't replace their trucks during the pandemic because there was that chip shortage and they just weren't being delivered. So major truck lines have a backlog of truck replacements that they need to get out there. And so they're ordering right now to get them out there. The other reason is the CARB, the California Air Regulation Board has a new rule coming in effect next year. And unfortunately that does impact the entire country. So the 2024 model years have a new emissions regulations put on them. And so that means that sticker prices are going to go up fairly significantly for 2024 model years and fleets are rushing to buy 2023's because they don't want that excess cost.

But if you all have been in this industry a while as I have been, if you remember when they put in the 2010 model years, which is when they put in the lovely DAF systems that you all like so much, but if you all remember the 2010 through, I don't know, 2013 model years, when they put in that new technology, they had a lot of problems. Because you know the first generation of any new technology, there's unforeseen hurdles. And so from 2010 to 2013, those truck years just had all kinds of problems and fleets, people like yourselves, you all remember that? I remember it very well because I was a business consultant and I was on the phone with you all every day, all day talking about the DAF systems, the regen problems, all the stuff that went with it. Well in 2024, there's new systems being put in place and guess what? They're probably going to come with unforeseen hurdles. So companies are trying to get ahead and not buy that first model year.

So we're going to see truck prices go up because of that competition. All right. So maintenance costs are up year-over-year, about 5%. The average I see right now is spending about $12,000 a year on maintenance. So think about that when you're setting up your budget. If you don't have a budget, let's get one set up. Call us, we'll help you. If you haven't updated one in a couple of years, if you're with us, it's probably time to set up a new one, right? Because we were just looking at the crazy string of variable costs, fixed costs, maintenance costs. Let's get that honed in and really help you out in this trying market. But if we look at this trend line, again, maintenance costs went up, up, up. We peaked at about 15 cents a mile August of last year. We're starting to see it go down again where the average IC is paying about 13 cents a mile right now for maintenance.

So that's a very customizable plan that you all can set up. And again, we can help you with that. We have all those stats so we can help you based on your truck model, your year, how many miles are on it, what kind of freight you run. It's very important because we discussed earlier, maintenance is the number one cause of failure. It's very important that you have a good maintenance plan and that you have good savings not only for the repair, but for the downtime that goes along with it. Because in that downtime, your insurances are still coming out, your truck payments are still there, all those fixed costs are still happening and your home bills are happening too. So it's not just the cost of the repair folks, it's everything that goes along with it, all right? So this chart on the left is what we just saw on the last chart. Independence, the people that are on their own authority have quite a bit higher maintenance costs.

So if you're out on your own, not only do you have all those excess costs for trailers, for insurances, for drop and hook, and loading and unloading, and things like that, maintenance costs are generally higher. One, because generally you probably have your own truck and maybe an older model, but two, you don't have that great network that comes with a lot of fleets. So I'm not here to tell you not to run your own authority if you can make it work, that's the American dream, right. But you just have to think through it, and understand the costs and make sure you have a good plan to go do that. And right now, and for the last 15 to 18 months, it has been more advantageous for most to run for a carrier. And we've seen that shift happen. So maintenance costs, again, they've really leveled off. In terms of total costs, if we look at this top chart here on the right, and cost per mile has gone down for about the last six to eight months. So we are starting to finally see some reprieve in maintenance.

And so that adds to the good news in my opinion, that we're seeing rates stabilize, and we're even seeing spot market rates and loads start to go up. We're seeing truck costs stabilize, we're seeing fuel costs stabilize, slightly go up, but maintenance costs are starting to go down as well. So things are starting to turn in the favor of the IC for the first time in a very long time. So net income is next. Let's talk through this. And this one feels depressing when you look at this slide and it hurts me as well. Net income is down 9% for the average independent contractor year-over-year, about $6,100. The average ATBS client is now making about $63,000 annualized. So a big drop. And if you look here in the bottom right, everybody's kind on the same playing field. Flatbed has really taken a hit. The flatbed market's been really tough here the last year or so. But that's bad news, let's talk about how we can fix it here in a second.

So net income, again, what I want to emphasize here on this top chart is let's look at these trend lines. We always see ups and downs, ebbs and flows. Trucking is cyclical. When the economy's good, when things are moving, you'll make more money, right. And so from 2020 to 2022, we saw all time highs in net income and then things started to fall off a cliff. But guess what? As of earlier this year, we talked about miles have creeped up a little bit. We've talked about fuel mileage has creeped up a little bit. Look what's starting to happen to net income here on this bar graph. We're starting to see it go up finally. And while it doesn't feel like it, because we're all a little bit behind, our savings is behind. We are starting to see positive results because those that are taking that one extra load, that are really focusing on that fuel mileage when you can, it's really starting to pay dividends.

And again, I'm not here to tell you how to run your business, but I'm here to give you some tips. So now let's talk about the quality of life of the independent contractor. So 20 years ago the average IC was running 140,000 miles year and making $47,000. Fast forward to today, the average IC is running 87,000 miles, that should be miles not dollars, for $63,000 a year. But I'm here to tell you we peaked at 70,000 about a year-and-a-half ago. You all can get there and plenty of folks are getting there. So how are we're going to get there, we're going to get there with a couple of strategies. One thing I want to point out is the average net income for ATBS clients that has been with us a year. We're really proud of this. So if you've been with us a year, the average client is still doing pretty darn well. So if we look here, the average bottom third ATBS client is making under the average, they're making about 56,000. If you look over time, the average bottom third of ATBS client is fairly stable.

That tells me this client, this driver is pretty happy. If they make that a thousand dollars a week, that's enough for them to go home, pay their bills, and do what they need to do. They're good with that. The middle third of ATBS clients, we peaked at 96,000, then we went to 95,000. And then again, we kind of fell off a cliff at the end of 2022, we fell off a cliff to about 87,000. But we're starting to stabilize already. And again, I think we're going to start to see an upward trend where the average middle third ATBS client is making 86. And again, same thing with our top third clients. They were making 100, almost 170 at the peak. Now they're down to about 150. But that pain is starting to slow down. And again, I think it's already turned the other direction here in the last couple months. And then the top 10% of ATBS clients that have been with us over a year are making over 200,000. So there's a lot of money to make out there for those of you that are doing the right things.

And again, some more positive news here. The things that you do impact your paycheck. And so what I want to look at here is first at the top, we're going to look at miles on a monthly basis. Year-over-year miles were down, down, down, down, down. And then about March of this year, we started seeing our IC clients run more miles on a year-over-year basis.

And guess what? Fuel mileage went up at the same time we saw. So fuel costs started going down on a year-over-year basis. And so more miles, fuel mileage going up. Net income has started to swing the other way here the last few months where we're starting to see paychecks get bigger because drivers are taking that extra load and they're running that better fuel mileage. So this is a crazy amount of information. What does this mean and what can you do? Well first we saw revenue per mile has slipped everywhere. So it started in the spot market, and then there was a lag and it hit the contract market at carriers. It seems to have bottomed out from everything we can tell. The spot market bottomed out earlier this year and has been stable to upwards since then. And from what we're hearing from contract carriers, they're at the bottom and they're stable now, hopefully going forward is what most of them are telling us as well.

So what does that mean? The grass is not greener on the other side right now folks. I know it feels tough maybe where you're at, but moving your asset is very expensive. It costs a lot of money to move, to get up to speed and things like that. So we're hearing a lot of talk about going to a new carrier, they're going to get better rates, things like that. The grass is not greener right now. What this also means, as I kind of reiterated earlier is that you have to know your costs right now, right. I mean we've seen that fluctuation that I started with of fuel, of truck payments, of everything that goes along with rates. Do you know your costs right now? Because they are changing rapidly and they have changed a lot over the last three years. And so the best business owners know, hey, it costs me $125 a day and it costs me 80 cents a mile to run my truck. So I need to make $125 a day plus 80 cents a mile. That means I need to run freight at this rate.

If you don't know how to do that, you need to figure it out right now. I hear a lot of IC's that have this false number in their head where they say, if I can't make 2.50 a mile, I can't make it. And oftentimes that number's made up. You need to figure out your breakeven for your business, and you need to run based on that and you can really be profitable if you know those numbers, right. Miles have finally trended upward, by only about 2,500 annually, that's only like 200 miles a month. We can do better and we're going to show you how that impacts you. Fuel mileage has improved but it's barely improved. I know that you all can do better. A lot of you out there might know Henry Albert, he's a Team Run Smart pro.

He's loosely affiliated with ATBS, a client of ours. He gets 10 miles to the gallon so you all can do better. We're seeing our averages about seven. I think the average IC should be getting eight with the modern technology out there. So if you're not, let's figure out how to get there because it's your biggest cost, but it's the one that you can change right now. You can literally change your habits tonight and put more money in your pocket. And the best owner operators have done both. They've taken that extra load, they've gotten better fuel mileage and their net income has not actually gone down. And then again, as I've said, you've got to save for maintenance. You've got to save for downtime. The average IC is $12,000 a year. That's a thousand bucks a month, 250 bucks a week. How much are you setting aside? And are you accounting for your downtime as well? It's a big deal.

So we just talked about net income going from 70,000 at its peak to 63,000 now. How can you make that gap up? Here's two ways. I'm going to give you two ways, you can mix and match. You can do both and make way more money. If you do these things now, when trucking gets better and you keep these habits, you are going to be doing extremely well and you're going to be making more money than you've ever made. So little chunks, little things at a time really make a big deal. All right? So think about it this way. You take one more load a month at 500 miles, $2 a mile, that's going to gross you a thousand dollars. Your fixed costs are not there. Why? Because this is an extra load. That means your fixed costs have already been met, you've hit your contribution margin. So this extra load, you don't have truck payments, you don't have insurances, you've already covered it. You only have variable costs. So let's say variable costs are 80 cents a mile at 400. So you've made $1,000, 400 in variable costs.

That one extra load made you $600, all right? $600 for that one extra load. You do that one extra load one time a month, that's $7,200 a year, right? That's the difference between now, which feels terrible. And the all time peak we were at 18 months ago is that one extra load. That's the difference, right. And so when the tough times get tough, what do you do? You got to work harder. This is one way you can make up that difference, right. And we're seeing that miles go up right now, but we've only seen it go up 2,500. And if you think about this on a weekly basis, this is a big deal. This is like $300 a week, $200 a week in your paycheck. What would you do with an extra $7,000? I'd go on vacation, you guys decide. But there's things you can do.

And again, you don't have to do all this at once. You can mix and match, right? So the average fuel cost, I just looked it up as of yesterday, is $4.63 cents. And a lot of questions you all had was what is going to happen to fuel? When's it going to go down? Most people believe it's not going to go down unfortunately, it's going to continue to go up. And there's a lot of reasons for this. Number one, and first and foremost, and most importantly, OPEC has cut production. Saudi Arabia and Russia are the biggest catalyst to this and the biggest producers, they have cut production of oil. And that's as simple as it gets on a high level is that we are not having as much oil come into the system, therefore prices are going up. Most carriers, most economists think that this is going to continue through the election cycle. There's a reason for that and we don't need to get into politics, but this is going to continue, right? And so I believe, and most people believe that we're going to continue to see fuel go up this year.

It wouldn't surprise me if we see $5 a gallon. Again, that should not matter to you as long as you're getting six or six-and-a-half miles to the gallon. The fuel surcharge will offset the cost of fuel, so long as you are getting six or six-and-a-half miles to the gallon. There's a weak lag on it. So there's a weak lag, but it should not matter to you. And the best operators know that if fuel goes up, you can actually make more money because that fuel surcharge offsets more of your cost. So a real cool chart here, if you go from six to seven miles to the gallon, depending on how many miles you run, you save between eight and $10,000 a year. Guess what? Every dollar you save, you get to keep. That money goes directly into your pocket. So every dollar you save, you get to keep. And guess what? We talked about net income going from 70,000 to 63,000. Here's a second way, just a different way you can make up that gap is by getting one mile per gallon better over the course of the year.

You get two miles per gallon better, you're going to save 15 to $17,000. Again, that money goes right into your pocket, all right. And I know it's not that easy folks, I know it. I know you've got hours of service, I know you've got delivery times you got to make. I know there's certain traffic flows that you got to be in, but you do have times where you can make that adjustment. And maybe you go from six to six-and-a-half. Well guess what? Six to six-and-a-half on this chart, we're talking about four to $5,000 a year. We're halfway there. So again, you all have the power, the ability, the mindset to make those adjustments now. And if you do it's going to go right into your pocket. So what are the easy takeaways from all this? One extra load per month is $7,200 a year. One mile per gallon is $8,000 a year. That's over $15,000 a year if you do those two things.

So if you go from 63,000 to all time high just by making those adjustments, and again, I'm not telling you to go do both those things all at once. What you got to do is you got to start small and you got to build on it. And if you build on it, it becomes habit. And if it becomes habit, guess what? You won't even know that there is a down market. And when the market gets good, you're going to essentially be printing money. So we don't need to make huge improvements, we need to make small steps and you're going to see it right away. What's next? We believe freight has bottomed out. As capacity shrinks as we saw, it's shrinking rapidly, things should get better soon. So you hear about failures, you hear about people going out of business, that's good for you all. That means capacity's leaving and that's going to stabilize rates and hopefully turn them around sooner rather than later.

And then again, the last two recorded months, and I can now say the last three or even four recorded months, we're starting to see positive trends with rates, with net income, with fuel mileage. If you making those adjustments, we're starting to see very positive trends. So what you all are doing is helping and it's a really good thing. So that's all I had on the presentation. I got a couple questions that I wanted to answer quick. If you all want to stick around, if you don't want to, no problem. If you do have more questions, you can give us a call here, 866-920-2827. It is five o'clock here, so we are winding down for the day, but give us a call tomorrow. You can also go to ATBS.com. You can submit your questions on our website. We've got a chat feature. You can reach out to me directly, my name's Mike Hostad. I've been here 15 years, I'm not going anywhere.

A couple questions though. Someone asked, what percentage do we see people pay W-2 as an owner operator? And so what percentage of the IC's out there have themselves on a payroll and are paying themselves W-2? I would tell you about 5% of people do that. And really the percentage doesn't matter. What matters is what your net income is. If your net income is roughly $80,000 or more, and that's net income, so that's after all your expenses and everything. If your net income is over $80,000 a year, it's probably more advantageous for you to get yourself an LLC, have it taxed as a Subchapter S corporation and put yourself on payroll. Okay? So there's no golden rule, but 80,000 is generally the cutoff. And I'll give you a real easy example for those of you still listening. Let's say you make a hundred thousand dollars profit this year and we put you on payroll. Our payroll, let's say for really easy numbers purposes, we have you on payroll for $50,000.

So I have my [inaudible 01:01:29] trucking and I am going to pay myself as a company driver through my own company. So I'm going to pay myself $50,000 throughout the course of the year, on that 50,000 in payroll, I'm taking out payroll taxes just like a company driver. I'm taking out Social Security, Medicare, federal state income tax, all that good stuff. While we still have $50,000 in profit leftover. That extra $50,000 is not subject to the self-employment tax, which is Social Security and Medicare. That's 13.2% you're going to save on that in taxes. You pay out that extra $50,000 in what's called dividends to avoid that Social Security and Medicare tax. So that's a way you can move funds around and pay yourself as an employee. But the reason that the break even is at 80,000 and not lower is because it's more expensive to do that. First you have to set up your LLC. Next you have to do double entry accounting because now you have an entity.

So you have to do a personal tax return, but you have to do a corporate tax return. And then you also have to pay for payroll services. So you have to pay ATBS or a payroll company to do those weekly payrolls for you. So it's more complicated and it's more expensive to do it, and it'll save you money once you hit that certain threshold. And so if you're at that threshold, give us a call. We're happy to talk through it with you, run a budget, see if it makes sense. If you're a client of ours and you're at that threshold, we're going to be reaching out to you proactively hereon in about a month. So just wait for our call or call us if you want to get it going ahead of time, if your mind's on it. So great question. I appreciate that question. And it's a really informative situation where again, we're down right now, income's down, but if you think you're going to be there for a stable amount of time in the future, it's something we can start talking through and figuring out here in the near future.

There was a lot of questions about truck values. We do continue to see truck values drop. Every month I see it goes down about 3%. And so that's good for you all. If you're in the market to replace your asset, we're coming on good times to get into a good quality used truck for pretty affordable prices. We're good friends with a pretty big leasing company here and they told us they were buying fairly decent used trucks with 400, 450,000 miles at like $35,000 a pop right now. So they have buying power, right? They're buying 30, 40, 50, 100 at a time. But again, we just saw the average used truck price is down to about 55,000. So we're starting to get into an advantageous time where you can start to get back into used trucks again and really impact your business. And then the fuel surcharge is a popular topic right now, so I want to talk about that real quick.

But the fuel surcharge is a mechanism that has been put in place for a long time and it's a very important mechanism. And so the fuel surcharge is there to offset the price of fuel and most carriers have a basis. And the basis is honestly usually a $1.25. And so what they do, what the carrier does every single week is they take the national average price of fuel, they subtract the basis. So let's say fuel is 4.25 a gallon. They subtract $1.25 basis. I'm just doing this for easy math purposes. But let's say it's 4.25, they subtract the basis, so they subtract $1.25, that makes it $3, and then they divide that by the average fuel mileage. Most carriers use six miles to the gallon. So that tells me that 4.25 minus the basis, $1.25 is $3 a gallon. And then they divide it by six, so that tells me the fuel surcharge would be 50 cents a mile in that basis. So if you're getting six miles to the gallon, the price of fuel should never impact your earning ability.

Some carriers haven't set at six-and-a-half miles per gallon. You just need to figure out where your carrier's basis is. Whatever that is, as long as you're getting that fuel mileage, the cost of fuel should never hurt you. And if you get better than that basis. So if your basis is six and you're getting seven, you're going to start to make more money as fuel goes up. So I know that seems counterintuitive, but the good operators out there, they know that as the price of fuel goes up, if you're getting six, seven, if you're getting eight miles of the gallon, you're going to start to make more money with higher priced fuel. So it seems backwards, but it actually is true that the fuel surcharge is there to offset that cost. Now that's with carriers. If you're in the spot market, it's an all-in rate, so that fuel surcharge is baked into the rate. So as fuel goes up, if rates don't go up, that's a hit to you as an individual in that spot market. All right?

And so you've got to figure out your basis, your cost per mile. And again, you can do that. If you're not doing it, we can do it for you. We have it on our P&L's. But you got to figure that out and figure out your basis, and then you can kind of figure out your true rate after you back out that fuel cost. So again, it's confusing. I know it's hard to just listen and get through that. If you need examples, we have them on our website, ATBS.com. If you go there and just type in fuel surcharge explained, we've got lots of great content to show you how it works, and how you can manipulate the system and make yourself more money. So thanks everybody for your time. I apologize for going over. Hopefully this has been really informative for you all. But again, my name is Mike Hosted, at ATBS. We appreciate everything you all do for us. Appreciate you attending today. Any questions you have, reach out to us, and we're happy to help and make sure that you're living a better life.

 So you all be safe out there. Have a great evening and thank you for your business and your time. Take care.