Fuel for Thought

MPG Matters

We all hear drivers talking about MPG (miles per gallon). Most of us understand just how much it can affect our bottom line. So many have resigned themselves to accept their truck’s MPG or just not worry about it. Just how much does your MPG cost you?

IFTA (International Fuel Tax Agreement) taxes are included in every gallon of fuel you buy. IFTA taxes are figured into each gallon of fuel, but, your trucks MPG and miles travelled in each state will dictate how much of that tax you owe, whether you pay it later or when you buy fuel, is up to you. Either way, you will owe the taxes for the miles driven, based on your MPG, this is why MPG is important in regards to taxes.

While we all want the best MPG, and many work hard to improve it, lower MPG will actually cost you more than more money for fuel each trip, it will also increase your taxes owed in EVERY state you drive since fuel taxes are based on the MPG of the truck each month and quarter.

But how much? Assuming you already know how to find the lowest priced fuel for the route (pump price minus taxes for that state), have you considered the taxes on a MPG basis?

Let’s say a trip from Chicago, IL to Atlanta, GA.

Miles:

IL 35 miles (I-80 and I-94)

IN 271 miles (I-65 and I-80)

KY 137 (I-65)

TN 175 miles (I-65, I-24, I-75)

GA 101 miles (I-75)

 

Total 719 miles

 

If you look at the differences between 7 MPG and 9 MPG

IL taxes .349 X MPG @ 7 = 1.74  @ 9 = 1.36

IN taxes .48 X MPG  @ 7 = 18.58 @ 9 = 14.45

KY taxes .216 X MPG  @ 7 = 4.23 @ 9 = 3.28

TN taxes .24 X MPG  @ 7 = 6.00 @ 9 = 4.66

GA taxes .30 X MPG  @ 7 = 4.33 @ 9 = 3.37

Total tax owed @ 7 MPG = 34.88

Total tax owed @ 9 MPG = 27.12

 

MPG matters more than just at the pump. The example above is just ONE trip. Increasing your MPG can add up substantially by year’s end. If you only ran that trip twice a week for 40 weeks a year, the increase in tax savings alone would be 620.80 more in your pocket. Again that is just the TAX savings, when you add in the money saved on the fuel, it will really add up. As for the fuel savings, the same 2 trips a week for the same 40 weeks will be 57,520 miles driven.

@ 7 MPG for 57,520 miles = 8,217 gallons of fuel needed.

@ 9 MPG for 57,520 miles = 6.361 gallons of fuel needed.

At an average price of $2.759 per gallon, $22,670.70 @ 7 MPG and $17,549.99 @ 9 MPG. That’s over $5000 per year you get to keep in your pocket. Just by increasing your MPG, over a year’s time, could potentially result in  over $5600 you get to keep. How is the importance of MPG looking now?

 

Back to the real world of trucking.

Increasing your MPG by just slowing down is not always an option. Sometimes schedules dictate running at or near the speed limit to make a delivery and slowing down to save fuel and fuel taxes just isn’t possible. Getting a lower MPG will cost you more in fuel and fuel taxes, but it can be outweighed by the additional revenue brought in by delivering faster and getting an additional load.

As an owner operator, it is up to you to decide where and when to spend your hard earned dollars. Increasing your MPG can be achieved with the addition of aerodynamic products in combination with driving style. Sometimes the cost of newer, more efficient equipment can also offset some the costs of upgrading. How much does your old truck cost you in lost MPG, fuel and taxes? Whether saving on fuel and fuel taxes are worth it to you, only you can decide. You may find a happy medium. Increase your fuel mileage when your schedule allows. Why race to get to a destination only to wait. Slow it down, increase your revenue by lowering your fuel costs and tax liability. When it makes more revenue to deliver early, run a little faster (but still legal) and get that additional load to offset the fuel and taxes.

 

See you down the road,

Greg