How Are Truckload Freight Rates Calculated? | GoShip

How Are Truckload Freight Rates Calculated?

Posted on:
Oct 09, 2019

Truckload freight rate is the price shippers or brokers pay carriers to move their freight. It plays an important role when shippers are deciding on the carrier or company to help them move their freights based on their budget.

Before landing a freight quote, knowing the factors influencing truckload rates and how they impact the

 final rate is essential.

While the final cost of shipment in Less Than Truckload (LTL) rates depend mainly on density and freight class, the cost of

Truckload shipping freight is flat and mostly depends on mileage or door-to-door standard price. Commodity type rarely affects the shipping cost as long as there is sufficient freight to fill a 48 feet (ft) trailer.

6 Factors That Affect Truckload Freight Rates

Knowing the factors that impact truckload freight rates will help you understand rate fluctuations, make it easier for you to get a freight quote, and manage costs effectively. Below are the key factors.

Mileage

Mileage is the most influential factor in determining the cost of truckload shipping. The longer the distance to be covered, the higher the truckload freight rate.

However, it is possible to have different shipping costs for a similar distance because mileage isn’t the only factor influencing the freight rate.

Also, the destination of your ship

ment can significantly impact the freight rate. The rate can increase significantly if your shipment’s destination is beyond the carrier’s service area.

Seasonality

There are 4 major freight types: Ground freight, air freight, rail freight, and ocean freight. Each of these freight types has its peak seasons, i.e., when mostly in demand.

These freight seasons significantly impact the fluctuation of truckload freight rates. The quiet season for the trucking freight industry is from January to March. During this period, there’s lesser demand for trucks, leading to a fall in freight rates.

From April, there is a seasonal spike where truck demand significantly increases. This causes the truckload capacity to shrink. Hence, the rates begin to increase.

For instance, the produce season starts at the end of April and reaches its peak throughout the summer, leading to high demand for refrigerated truck capacity.

Lead Time

The lead time is the general time it takes a shipper or broker to search and arrange the shipment ahead of the loading date. The greater the lead time, the lower the shipping cost because.

Longer lead times can significantly save costs for companies and increase the consistency and efficiency of carriers. Furthermore, longer lead times can lead to an increase in key performance indicator (KPI).

Fuel Price

Fuel prices also determine truckload freight rates. Because fuel prices change regularly, these fluctuations are considered when calculating the freight rate.

Generally, the fuel surcharge is included in your freight quote, based on the current price per fuel gallon. Hence, it’s important that you consider it so you have an idea of the likely rate a carrier may request.

Shipping Time

The flexibility of your shipment also counts when the freight rates are calculated. If you are shipping long distances, it may be more beneficial for the driver to have a delivery window or longer transit time.

However, the more urgent your freight is, the higher the total shipment cost. Other minor factors influence shipment costs, like accessorial charges, service fees, etc. 

Equipment Type

Specific equipment such as flatbed and refrigerated trucks are mostly more expensive than conventional dry vans because of their limited availability and the experience needed to operate them.

In cases of oversized load (when the shipment is wider or taller than 8.5 feet), there will likely be extra costs such as load permits and fuel for escort vehicles.

Ensure that you disclose your shipment’s exact size and handling requirements to help carriers book the ideal equipment and provide you with an accurate quote.

How To Calculate (and Discover) the Best Truckload Freight Rate

Most carriers determine their truckload freight rate using mileage before considering other factors. Here’s how the rate is calculated based on mileage:

  • Firstly, they take the mileage between the loading location (starting point) and delivery location (final destination).
  • After which, you can divide the overall rate by the number of miles between these locations to get the truckload freight rate.

Overall Rate ÷ Mileage = Truckload Freight Rate/Mile

For instance, you have to transport a shipment from California to Miami. Based on your exact loading and unloading locations, the distance involved is around 2800 miles. Therefore, if the overall rate is $10,800, the truckload freight rate per mile is:

$10,800/2800 = $3.85.

This means that the truckload freight rate is $3.85/mile.

However, when other factors mentioned previously are considered, the rate will be slightly increased.