HOW TO JUSTIFY BUYING A HEAVY TRUCK FOR THE FARM

Originally published on September 14, 2006

 

Patrick Tatchell of Frontier Peterbilt in Saskatoon reports that business is good in farming country.  “We continue to sell mid-to-late-'90s Peterbilts to prairie farmers along with Super B trailers” he said.  "We are selling more units now than we did five years ago”.

Intuitively this makes sense.  In efforts to extract more money from the marketplace, farmers are identifying their customers, building relationships and using heavy trucks and trailers to deliver their products to market on a timely basis.

How many kilometers do farmers need to travel to justify buying their own heavy truck and trailer?  When should they consider renting or hiring a domestic carrier?

In Table 1, I have outlined my cost assumptions.  We are spending $30,000 on a mid-to-late 1990s Peterbilt and an additional $30,000 for steel Super B trailers.  If you plan to work the heavy truck and trailers in the off-farm season and require commercial status, then expect higher licensing and insurance costs.  Fuel and repairs will also cost more because you will not be able to burn colored diesel and your provincial Highway Traffic Board will require you to have safety work done on your truck and trailer every six months at an authorized dealer.

While farm plates and insurance are considerably more affordable than the commercial alternative, you are licensed to carry only your own farm grain.  This excludes the grain of your neighbor, nephew or uncle.  To haul for these individuals, you would have to contact your provincial Highway Traffic Board and request an upgrade permit for each of these loads. 

Domestic carriers that I spoke with are looking to charge $3.11 per loaded kilometer.  Using the cost assumptions in Table 1, we are able to produce a cost per kilometer, given varying distances traveled.  This data is reproduced in Table 2.  Rather than looking at loaded distance, I presented Table 2 on the basis of odometer distance, which in simpler terms is “there and back again” or “double the loaded distance”.  Using this table, we see that a farm-plated truck with trailers will begin to see a return on labour only after traveling 8,350 km.  At this distance the farmer's cost before labour equals that of his local domestic carrier. 

If you are looking at securing commercial status and plan to use trucking to supplement your farm income, then you should plan on trucking a minimum distance of 21,750 km.  At this distance your costs should be competitive with your peers and you will begin to bring in profits of your own.

I was surprised to learn that Frontier Peterbilt is offering a one month minimum lease for its heavy trucks and trailers.  In Table 3, I have reproduced the cost per kilometer using a one month minimum lease.  The farmer who leases begins to see a return on his labour at 6,755 km, providing he can make the distance in his one month lease.

 

Allyn Tastad, certified general accountant, is a partner in the accounting firm of Hounjet Tastad Harpham in Saskatoon at 306-653-5100, e-mail at allyn@hth-accountants.ca or website www.hth-accountants.ca. He is also involved in the family farm near Loreburn, Saskatchewan.  The opinions expressed in this column are for information only.