Business of Trucking – Page 4

How IFTA Works

IFTA rates available from the International Fuel Tax Association, Inc.

One of the most frequently asked questions I get is “So how does IFTA work anyway?” Once truck owners understand IFTA they all change their fuel purchasing ways. In doing so they lower their fuel cost and improve their profits.

In the day of the original “bingo card” registration, which no longer exists, truck owners had to buy just enough fuel to drive in each state. Since then the International Fuel Tax Agreement (IFTA) was created. IFTA completely eliminated the need to buy fuel in every state. In fact, doing so all but guarantees you are paying far more for your fuel than necessary.

IFTA fuel taxes are collected in all states and jurisdictions that have a state or jurisdiction fuel tax. Oregon does not have fuel taxes but they do issue IFTA accounts. All carriers who operate an apportioned IRP are required to have an IFTA account and a list of states or jurisdictions they operate in. At the end of each quarter you will file your quarterly IFTA fuel taxes. Here is where the value of understanding IFTA turns into lower fuel cost. You owe each state it’s fuel tax based on how many gallons you used while driving in their state. Not how much you bought! What that means is when you buy fuel at the lowest cost BEFORE taxes you will almost always be due a refund at the end of the quarter. Here is how that works using 2^nd quarter 2015 IFTA fuel tax rates.

Illinois Pump Price $3.399

Missouri Pump Price $3.259

Most truck owners will buy Missouri because it costs less at the pump.

2015 2nd Qt. IFTA Fuel Taxes

Illinois .4270

Missouri .1700

Your truck averages 5mpg

You drive 50 miles in Illinois and 50 miles in Missouri

You owe each state a IFTA fuel tax on 10 gallons of fuel

Buying fuel in Missouri

You buy 20 gallons of fuel in Missouri for $3.259 a gallon

Actual fuel cost without tax is $3.089

You have an IFTA tax credit of $1.70 from Missouri

You owe Illinois an IFTA tax of $4.27

You owe a IFTA tax Payment of $2.57

Instead, Buy fuel in Illinois

You buy 20 gallons of fuel in Illinois for $3.399 a gallon

Actual fuel cost without tax is $2.972

You have an IFTA tax credit of $4.27 from Illinois

You owe Missouri an IFTA tax of $1.70

You have a tax credit and Refund of $2.57

In this example the answer for “How Does IFTA Work” means purchasing fuel in Illinois is a 3 month investment that lowers your fuel cost by almost $.12 a gallon! If your truck averages 5 mpg, you are increasing your profits by $.025 per mile. If you drive 175,000 miles in a year, that is a total savings of $4,375.00! Yes, understanding IFTA can save you thousands of dollars every year for each and every truck you own! Learn more ways to save money and increase profits in my After Market Truck Parts post.

Junk Yard Truck Parts

When I modify my truck, I do so by locating and purchasing as many Junk Yard Truck Parts for the modification as I can. The easiest way to get used truck parts is to find a quality junk yard with OTR trucks. I have been known to spend hours with my tool bag at my favorite junk yard collecting Truck Parts. I enjoy the time invested in saving money while collecting parts to improve my trucks performance and profitability.

When truck owners see my truck and ask about my modifications they are shocked and in disbelief when I tell them that the majority of the parts I used are Junk Yard Truck Parts. Take for example the picture of my 1999 International 9900i shown above. As you can see I added 2 fuel tanks on the drivers side. The first is a 30 gallon fuel tank for my APU mounted directly in front of my first drive axle. The other is a 130 gallon fuel tank for truck fuel mounted below the drivers door. On the passenger side of the truck I added another 130 gallon fuel tank for the truck below the passengers door. With my original fuel tanks, that is a total of 560 gallons of truck fuel and 30 gallons of APU fuel! I purchased both 130 gallon fuel tanks, their carriers, their straps and all mounting hardware for a total of $300.00. If I had purchased all those parts new it would have cost an estimated $4,000.00. By using Junk Yard Truck Parts I saved $3,700.00. The best part is I improved my trucks performance and increased my profits by more than .30 cents per gallon of fuel!

After I decided to add the fuel tanks, I had to decided where and how to mount my battery box. You guessed it, I found my solution using Junk Yard Truck Parts. I simply walked around the junk yard looking at different trucks and focused my attention on the older trucks since they had different battery box styles and mounts. And I saw my solution on an old International cab over. A battery box mounted right behind the cab on the frame rails. Because of the other parts I was purchasing that day (fuel tanks, hangers, straps, etc.) it’s cost, free!

Watch for my upcoming post “How Does IFTA Work?” to see why I added 3 fuel tanks to my truck and exactly how I did increase my profits by more than .30 cents per gallon of fuel. I must read for any truck owner.

If you would like to learn more about modifying your truck using after market truck parts, lowering your maintenance cost and saving money, read my post After Market Truck Parts.

After Market Truck Parts

Once you have successfully financed your truck it won’t be long until you want to improve your profits. Using after market truck parts to modify your truck can lower your maintenance cost and save big money every year. I have had amazing success with some products while others left me disappointed. My best after market truck parts successes include oil by-pass filters, heated fuel filters, and tire inflation systems. My worst experiences were early on in my truck owning career because I failed to use common sense. Don’t make the same mistakes I did. Before you buy after market truck parts there are a few rules to remember.

1. Ensure you really want or need any product before you purchase it! If your goal with after market truck parts is to increase your profits at the end of the year then you need to verify the ROI (return on investment). The only way to do this is to verify that your total cost paid for a product is lower than the estimated savings in 1 year. If it is a larger purchase and your ROI plan is for 3 years, then multiply your estimated annual savings by 3 and compare it to your total cost of the product.

2. Don’t automatically believe what the salesman is telling you. Ask for references that he has already sold the product to. Talk to other truck owners who are using, or have used, after market truck parts because they will provide you with their uncensored product information. Truck Owners that are not referred to you by the salesman are your most reliable resource for the performance of after market truck parts.

3. Look for any competitors that might offer a similar product. If you find one then repeat rule #2 until you decide on which product you are going to purchase.

4. Keep looking to improve your trucks performance by using after market truck parts. In doing so it helps you stay competitive with your competition while maintaining your profit margin.

After market truck parts aren’t the only way to lower maintenance cost and improve your profit margin. In my next post, Junk Yard Truck Parts, see how I dramatically reduced my fuel cost by over .30 per gallon!