How Much to Charge for Delivery Per Mile: A Comprehensive Guide

Are you charging enough per mile to actually make money, or just covering gas while hidden costs pile up?

Most delivery business owners think they’re profitable until they calculate their true cost per mile. 

Determining how much to charge per mile for delivery means accounting for every expense, not just fuel.

Cost per mile for delivery = (Fixed Costs + Variable Costs) ÷ Total Miles + Profit Margin

Quick calculation steps:

1. Research market rates in your area
2. Calculate overhead costs (gas, maintenance, labor, insurance)
3. Apply the formula – (Total costs ÷ total miles driven) + profit margin
4. Adjust for variables (weight, rush hours, after-hours fees)

However, your pricing precision matters.

See the stats to understand why:

• 70% of American customers prefer the cheapest or free home delivery
• Only 23% are willing to pay extra for same-day or premium service

Charge too high, and customers switch to competitors. 

Charge too low, and your profit margins shrink. 

Don’t worry – this guide explains how to set pricing that retains customers while ensuring decent profit.

What Factors Influence Delivery Price Per Mile?

Understanding these key components helps you build a fair and profitable pricing model.

Here are a few prominent ones: 

• Vehicle type: Small cars have lower operating costs, while vans and trucks incur higher fuel and maintenance expenses.
• Fuel prices: These form a significant aspect of overall costs, and vary by global and local crude oil prices, region-specific taxes, and seasonal demand fluctuations. Fuel typically costs $0.14 per mile for vehicles getting 25 MPG at $3.50/gallon
• Insurance & licenses: Commercial delivery vehicles require higher insurance premiums and specialized licenses compared to personal vehicles.
• Labor costs: These include delivery drivers’ salaries and benefits if you hire them full-time. If you use contractors, delivery fees are decided based on factors such as distance, type of service, and goods transported.
• Delivery region: Whether you serve an urban or rural area also determines your delivery price. Rural deliveries cost more due to longer distances between stops and challenging terrain that increases vehicle wear and tear. 

4 Prominent Pricing Models to Consider 

Your delivery pricing strategy may depend on the type of delivery, customer expectations, and operational costs. 

Take a look at the three major models, each with its positives and negatives, to help you decide which suits you the most. 

1. Per-mile pricing

This model charges the price based on the total distance traveled. Businesses that execute long-haul deliveries often use this strategy. 

Pros: 

• Cost-effective delivery method to maximize profits
• Easily calculable and scales with the distance
• Offers transparency for clients
• Aligns with fluctuating fuel and wear/tear expenses

Cons: 

• As per-mile pricing doesn’t account for time spent idling during traffic or congestion, managing multi-stop routes becomes challenging.
• May not be ideal for very short distances or routes with significant non-driving time.

$1/mi is only good for 3-5 miles most of the time, unless that is putting you towards somewhere you want to be physically. $1/mi but taking me out into the wilderness, or into another town over that’s out of zone? No, that’s not great. You need to consider your return journey when you accept.

According to industry experts on Reddit

Let’s understand with an example: Suppose the base cost is $1/mile, and the margin is 25%. It means the final cost per mile is $1.25 per mile.

2. Flat rate pricing 

This model works best for localized deliveries within shorter distances, where you charge a fixed fee regardless of exact distance, weight, or parcel size.

It suits localized deliveries within shorter distances. 

Pros: 

• Predictable costs that are easy for customers to understand
• Simplified budgeting 
• Easier free shipping promotions 

Cons: 

• May not be cost-effective for very light items.
• Lacks flexibility for diverse delivery needs.
• Limited flexibility, as there’s no way to accommodate diverse product catalogs or international shipping

For example, if you fix a $10 flat fee for any delivery within 10 miles, it becomes your flat rate price. 

3. Hourly rate pricing

You charge a rate based on time, i.e., by hour instead of by distance. It suits jobs that involve a lot of loading/unloading, setup, and longer wait times. 

Pros: 

• Adapts to changes in scope or unforeseen delays during a delivery schedule
• Clients know you are charging them for the actual time spent, preventing confusion and boosting transparency.
• Fair compensation for all the time spent on a delivery.

Cons: 

• Hard to estimate in advance, leading to uncertainty
• Limited daily earning potential compared to per-mile or per-stop models
• Lower incentives for efficiency

Consider an example of a furniture delivery business. 

Consider an example of a furniture delivery business. Example: Let’s say you charge $45/hour for furniture delivery and a $10 handling fee for heavy or bulky packages. It means total delivery costs become $55/hour

4. Per-stop pricing

You calculate the delivery cost depending on a base fee for each stop along a delivery route. It doesn’t consider time spent at a stop or distance covered to reach a stop. 

It suits the courier service business in busy, congested urban areas where drivers need to visit multiple locations in one journey. 

Pros: 

• Higher scope for efficiency if you manage to optimize routes and cover more stops per trip.
• Clear cost breakdown, eliminating any disputes

Cons: 

• Overlooks the actual distance between stops, which can impact profit margins at times
• May not be suitable for routes with highly variable distances between stops or significant time spent at each stop.

Example: Let’s consider you have 200 stops and $1 per stop. Your delivery cost becomes 200 stops × $1 per stop = $200 total

Step-by-Step: How to Calculate Your Per-Mile Rate

Here are the steps to guide you on how to calculate your cost per mile. 

Step 1: Identify your operational costs

This step involves identifying and estimating all your monthly delivery-related costs, including both fixed and variable costs.

Here’s a rough breakdown of the costs of using a sedan that drives 2,000 miles per month:

Total operating cost per mile = $0.14 + $0.098 + $0.075 + $0.195 + $0.055 = $0.563/mile

This is your break-even cost per mile without profit or labor.

Step 2: Consider labor charges and profit margins

Let’s say you want to keep a margin of $25/hour and average 30 miles/hour. 

• Labor cost per mile = $25 / 30 = $0.83/mile

Now, add your labor to the operating costs:

• Total = $0.563 + $0.83 = $1.393/mile

When you apply a 25% profit margin:

• Final rate = $1.393 × 1.25 = $1.74/mile

Step 3: Account for special circumstances

Not all deliveries are similar. Specialized deliveries might incur specialized handling or customer service requirements. 

For instance, you charge extra when: 

• The weight of packages exceeds 50 pounds — Add $10–$25
• Weekend, after-hours, holiday-time deliveries —Add 10-20% of the base cost
• Delivery involves assembly or installation → Add flat $20–$30 
• Delivery is urgent or has to take place within narrow time windows — add rush-time surcharge $15–$20

If you apply $1.74/mile as the minimum delivery fee for a 10-mile delivery with heavy items on a weekend: 

• Base: 10 × $1.74 = $17.40
• Bulky surcharge: $15
• Weekend surcharge: 15% of $17.40 = $2.61
• Total: $17.40 + $15 + $2.61 = $35.01

Step 4: Include return trip miles

Always consider the return leg unless there is another delivery planned along the route when returning. 

You can either charge some fee for a round trip. For a 10-mile delivery: 10 miles × 2 (round trip) = 20 miles × $1.74 = $34.80.

Another way you can compensate for it is by increasing the base rate slightly (for example, to $2/mile) so you can cover deadhead mileage. 

Pro Tips and Common Mistakes to Avoid when Calculating Cost-Per-Delivery

Expert-Recommended Practices

• Track your competitors: Evaluate what your competitors are doing. Identify the scope of your intended delivery area and average market value. It will help you find a base or minimum delivery fee. Afterward, you can consider additional factors, like the industry and service.
• Use route optimization software like Upper: It helps create efficient delivery routes to reduce fuel usage, drive time, and unnecessary detours. It, thus, helps handle the complexities of large-scale delivery operations while enhancing efficiency. 
• Track all expenses consistently: Provides a better visibility into your financial health and enables you to adjust pricing based on actual operational costs.
• Build a buffer for unexpected costs: In case of unforeseen situations, like fuel price spikes, last-minute order changes, and vehicle repairs, it helps you protect your margins.

Common Mistakes to Avoid 

• Forgetting to charge for return trips: It eats into profits as half of your journey stays unpaid.
• Ignoring vehicle depreciation: Doing this overlooks a significant long-term cost that hampers your profit margins substantially.
• Undervaluing time spent waiting or assembling: Failure to account for time leads to hidden labor losses and poor hourly ROI.
• Using flat rates on variable long-distance jobs: It results in underpricing as distances and associated fuel costs vary vastly. 

Real-World Examples

As already evident, your pricing model can vary based on multiple factors, including: 

• The type of service
• Customer needs 
• Delivery zones

Let’s understand with real-world examples:

Urban courier example (Independent driver)

• City: Chicago
• Vehicle: Sedan
• Average cost/mile: $0.80
• Rate charged: $1.20/mile

Suburban florist (Small regional business)

• Location: Suburban neighborhood
• Pricing Model: Flat rate within service area
• Flat rate: $10 within 10 miles
• Same-day surcharge: $5 for urgent orders
• Typical order volume: 5–10 deliveries/day
• Estimated revenue per day: Assuming 5 deliveries with same-day surcharge and 5 without: (5 × ($10 + $5)) + (5 × $10) = $75 + $50 = $125. For 10 deliveries with same-day surcharge: 10 × ($10 + $5) = $150.

Regional freight operator (Fleet of 10 vans)

• Location: Multi-city regional area
• Fleet Size: 10 delivery vans
• Pricing Model: Hybrid — per-stop locally, per-mile for long-distance
• Average CPM (Cost Per Mile): $1.10
• Rate charged for intercity routes: $1.60–$2.00 per mile
• Rate charged for local routes: $1.50 per stop
• Example: 50-mile delivery with two bulky packages:
  • 50 miles × $1.80 = $90
  • Bulky item surcharge: $15
  • Total: $105

Cost Per Mile: Your Key to Competitive Pricing Strategy

Cost per mile is a crucial financial metric. It gives you a better understanding of the transport costs associated with each mile your driver travels to complete the delivery process. 

Proper per-mile pricing balances competitive rates with healthy profit margins, creating value for both you and your customers. So, it is high time you priced your delivery services right to attract more customers and ensure high revenue and profits.