• Running costs are directly connected with the actual use of the vehicle.
• They are variable costs because they rise or fall with vehicle use.
• They are also direct costs because they can normally be identified with individual vehicles.
• Four key running-cost components are fuel, lubricants, tyres, and repairs/maintenance.
• Running costs are normally expressed as pence per kilometre (ppk), although miles can also be used.

4.1 FUEL – DIESEL AND/OR PETROL

• Fuel is normally one of the largest variable costs for goods vehicles.
• Fuel cost is affected by fuel price and the vehicle's consumption.
• Factors increasing fuel consumption include heavy-footed driving, congestion and fuel leaks.

4.2 LUBRICANTS

• Lubricants form part of running costs.
• Like other running costs, lubricant expenditure is converted into a cost per kilometre for costing purposes.

4.3 TYRES

• Tyres are running costs and are variable/direct costs.
• Original tyre equipment is specifically deducted from the vehicle cost before depreciation is calculated.
• Tyre costs should be converted to a pence-per-kilometre figure for the running-cost calculation.

4.4 REPAIRS AND MAINTENANCE

• Include gross wages of fitters/mechanics/maintenance staff, spare parts and outside repairer costs.
• Other general workshop expenses are treated as administration costs unless the workshop operates as a separate profit centre.
• Where the workshop is a separate profit centre, its internal charge is treated like an outside repairer's invoice and allocated to the vehicle.
• Formula: accumulated repair and maintenance costs for the period ÷ actual kilometres run = cost per km.
• Training example: £10,800 ÷ 90,000 km = £0.12/km = 12p/km.
• If individual vehicle figures are unavailable, an average figure can be used.

4.5 DRIVERS' OVERTIME AND EXPENSES

• Overtime and bonuses above the guaranteed wage must be included in the total costing.
• Also include overnight subsistence, tolls, parking and other relevant expenses.
• International work may involve additional ferry/Channel Tunnel and foreign toll/road-user charges.
• These expenses are normally added separately to the quotation rather than converted to pence per kilometre.

4.6 SUMMARY – VEHICLE RUNNING COSTS

• Convert each running-cost component into pence per kilometre and add them together.
• Training example: fuel 40.00p + lubricants 0.55p + tyres 6.80p + repairs/maintenance 12.00p = 59.35p per km.
• Total running cost is then combined with standing costs and an appropriate profit adjustment to establish customer rates.