Fleets operate on ultra-thin profit margins where every penny counts. But paying unnecessary toll fees and violations can eat up profit margins quickly.
Failing to pay a small toll on time can lead to a $500 problem as penalties and late fees quickly add up. A 100-truck fleet can easily incur a $1 million problem with a single tolling agency. Motor carriers may not even realize a toll problem exists until it is too late.
Fleets must wrangle control of their toll spending to protect their profitability. The PrePass webinar, “How to Keep Toll Costs from Eating into Your Truck Fleet’s Bottom Line,” shares practical tips to keep fleet toll costs in check.
Why do we have Tolls and Why are they Relevant?
If fleet owners overlook the bottom line for every load, profits can erode quickly in tolls.
Fleets must use data coming from their connected vehicles to make better decisions in an environment overrun by ever-increasing costs, ever-changing regulations, and ever-more ways for governments to extract money from commercial vehicle traffic.
Most infrastructure funding currently comes from taxing fuel. But fuel tax will decline as the country moves to electric and alternative fuel vehicles. The government is eyeing more road tolling and road use charges as a means of covering infrastructure costs.
Today there are more than 50-plus toll authorities, comprising more than 120 tolling entities, and the tolls they collect are growing. These agencies collected $15 billion in the past decade, an increase of over $6 billion from the decade before.
Over that same timeframe, the Consumer Price Index – a measure of the average change in the prices paid by consumers for goods and services – increased far less. Consumer prices have increased almost 17% over the last 10 years, but toll costs have increased 73%.
What are the Costs of Tolling?
Agencies may post toll rates on signs, but often fleet managers are unaware of the charges. Some toll agencies find alternative ways to assess additional fees to make more money.
Motor carriers experience unexpected tolling costs for a variety of reasons including fines for speeding through a toll booth, late-payment fees, equipment issues that lead to maximum toll charges, license plate misreads, administrative costs, and more.
Without a tolling plan, fleets will lack visibility and control of their tolling spend. Fleets are open to theft and fraud if someone steals their transponder and uses it in a passenger vehicle. These are just a few examples of risk to the bottom line.
Surprise toll costs can quickly eat up profits. Consider that the revenue of a single truck may be $4,300 per week. The operating ratio (or expense to revenue ratio) for that truck is in the mid to high-nineties, meaning that for every $100 a truck brings in revenue, the fleet keeps between $2 to $6. Therefore, even at the very highest level of profitability, each truck may only make an operating profit of around $400 per week.
If a fleet gives up $3,700 in toll violation fees in a single week because it lacks a transponder and has plate reads, a truck must run for an entire month to make up just half that cost.
What are Some of the Toll Fees and Risks?
Additional fees charged by toll agencies can lead to a costly spiral for fleets. Each fee can build on the other. Additional fees can include:
- Administration fees
- Late payment fees
- Collection fees
- Civil penalties
- Plate read surcharges
- Violations fees
With these fees, a toll invoice can go up 657%, 700%, 800%, and even 1,072%. In one case, a single $9 toll led to a $96.50 charge. The toll agency discovered a violation when it looked up the trailer plate, resulting in an additional $87.50 in fees. The agency charged a civil penalty, a combat violent crimes fee, and even an ambulance fund fee.
In another example, a single truck incurred $1,600 in violation fees for one week. The toll only amounted to $266. But the carrier incurred 16 different charges involving license plate reads. The tolling agency charged $100 for each plate read. Multiply charges like this by 100 trucks and it’s easy to see how a fleet may pay an extreme amount of money for toll violations.
What Opportunities Are There to Better Control and Estimate Toll Charges and Data Integration?
Understanding why the problem occurs is the first step in preventing it. Six reasons may lead toll charges to get out of hand.
- Poor Plate Management. Fleets sometimes fail to upload license plates, so toll agencies can identify who owns that vehicle, power equipment, or trailer. Toll agencies must pay the Department of Motor Vehicles to look up plate information, and then passes that cost onto fleets.
- Lack of Central Visibility and Control. A fleet may have hundreds of accounts across the country when they let each regional depot handle tolling. Some depots pay tolls on time while others do not. Without central visibility and control, many fleets don’t realize they have a problem.
- Toll Account Creep. Regional managers may shut down toll accounts and open new ones to avoid dealing with toll disputes. They think this will make the problem and expense go away, but the costs keep building.
- Cash Deposits. A fleet with dozens of trucks driving across the country may have individual accounts at different toll agencies and may make advance cash deposits to cover tolling costs. This scenario ties up working capital. It’s better for fleets to secure their toll spend with a surety bond, which costs less and reduces the need for cash deposits. This puts working capital back into the business instead of with toll agencies.
- Timely Payments. Failing to make timely payments can lead to late-payment penalties and additional charges. Costs add up quickly if just one depot doesn’t pay on time.
- Lack of Training. Costs escalate when fleets fail to train employees to deal with violations or disputes. Employees also must understand the difference between a transponder charge, a plate recharge, or a sticker charge. And they must know how to optimize the best solution for the fleet. For instance, a fleet that drives mostly in Maryland can get a Maryland-based transponder that will maximize discounts in the state. But if they also have routes in New York or New Jersey, it’s better to get an E-Z Pass to access even greater discounts. A fleet running across the country may benefit from a PrePass Elite Pass. The right solutions vary by fleet.
- Settlements – if Possible. Fleets often are unaware that they can settle toll disputes. But if the fleet cannot make a compelling case, settling can be difficult. When fleets work with a provider, such as PrePass, help is on their side. PrePass maintains relationships with all toll agencies and can help settle violation fees for fleets.
What are Some Best Practices?
Toll spend control begins with visibility. With better visibility and control, fleets can do a better job of rating and pricing.
Reporting and analysis of expected tolls versus actual tolls by lane can help fleets know for sure if they are making money or leaking profit on a contract. Getting visibility into toll charges to better rate or price loads prevents underquoting. With data integration and the right tools, fleets can reconcile tolls by vehicle and allocate charges to the right owner-operators, load, and job.
Besides integrating data and better reporting, there are a few other methods to helps fleets keep toll costs in check:
- Centralize Data. Move toll spend from regional depots and centralize it. Use a vendor like PrePass to combine all toll agencies into one invoice so that your fleet has visibility and control.
- Improve Plate Management. Reduce and eliminate plate read violations with better plate management. Vehicles have license plates, transponders, and stickers. Keep license plates up to date with toll agencies for both power equipment and trailers. Fleets don’t want to be charged $100 for the toll agency to look up the plate at the DMV.
- Proper Vehicle Classification. Toll charges vary by vehicle classification. Failing to manage vehicle classification correctly can lead to tens of thousands of dollars in fines.
- Use Transponders to Avoid License Plate Reads. Put transponders in vehicles to manage tolls. It may not be worth putting a transponder into a vehicle that rarely encounters a toll. But a fleet still may want to manage that license plate to avoid extra tolls should that vehicle incur toll costs.
Trucking companies operate in an environment where margins are ultra-thin, but costs continue to grow. Getting a handle on toll costs can keep more of a fleet’s margins flowing to the bottom line.
The PrePass blog and podcasts are published as a public service of PrePass®, the most reliable and technologically advanced weigh station bypass and integrated electronic trucking toll payment platform in North America. PrePass also includes INFORM™ Safety and INFORM™ Tolling software for improving truck safety scores and lowering toll costs.