Small Fleets and the Rate Challenge - Navigating Rising Costs in a Difficult Market

For small trucking fleets, the current freight environment presents a particularly difficult challenge. According to the American Transportation Research Institute's (ATRI) recently released 2025 findings in An Analysis of the Operational Costs of Trucking, the gap between operational costs and achievable rates is creating unsustainable margins across the industry - and small fleets are feeling the pressure most acutely.

The Small Fleet Reality

ATRI's research reveals that the industry's average cost of operating a truck in 2024 was $2.260 per mile. However, when lower fuel costs are excluded, marginal costs actually rose 3.6 percent to $1.779 per mile—the highest non-fuel operating costs ever recorded by ATRI. For small fleet owners operating on thin margins and competing against larger carriers for freight, these rising costs create a critical challenge: how do you maintain profitability when your costs are climbing but rate pressure remains intense?

Small fleets often face additional cost disadvantages. While larger carriers might negotiate volume discounts on equipment, parts, and insurance, smaller operators typically pay more on a per-unit basis. This makes every dollar of operational cost even more critical to understand and manage.

Where Small Fleets Are Getting Hit Hardest

ATRI's data shows cost increases in areas that disproportionately affect small fleets:

• Truck and trailer payments surged 8.3 percent to a record-high $0.390 per mile. Small fleets that recently invested in new equipment to remain competitive are seeing these payments consume a larger portion of revenue.

• Driver benefits costs increased 4.8 percent to $0.197 per mile. Small fleets must offer competitive benefits to attract and retain quality drivers, yet have less flexibility to absorb these rising costs than larger operations.

• Insurance costs remain a significant expense category, and small fleets often face higher rates due to smaller risk pools and less negotiating power with insurers.

Meanwhile, while driver wage increases slowed to 2.4 percent and fuel costs declined, these areas of relief don't offset the rising fixed costs that small fleets must pay regardless of how many loads they haul.

The Margin Crisis for Small Operators

The profitability picture is particularly stark for smaller carriers. ATRI's findings show average operating margins below 2 percent in every sector except less-than-truckload (LTL), with the truckload sector posting an average operating margin of -2.3 percent. For small fleets operating just a handful of trucks, negative margins can quickly become an existential threat.

"The trucking industry is facing the most challenging freight market in years, with loads down and costs increasing," said Groendyke Transport, Inc. President and CEO Greg Hodgen. "ATRI's Operational Costs data and the customized benchmarking report that compares us to similar fleets are more critical than ever as we navigate rising costs and decreasing margins in this adverse environment."

Small fleet operators face difficult decisions in this environment: accept unprofitable loads to keep trucks moving, park equipment until rates improve, or exit the industry altogether. The report documents industry-wide impacts including a 2.2 percent drop in truck capacity, empty miles rising to 16.7 percent, and many carriers reducing staff and parking trucks.

Rate Negotiations When You're the Smaller Partner

Small fleets typically have less leverage in rate negotiations than their larger competitors. When you're competing for business against carriers with hundreds of trucks, it's challenging to hold firm on rates that cover your true costs. However, small fleet operators who understand their exact cost per mile—and can clearly communicate their value proposition—are better positioned to negotiate sustainable rates.

This is where having a partner who understands the unique challenges of small fleet operations becomes valuable. At Cottingham & Butler, our transportation specialists work extensively with small and mid-sized fleets to help them compete more effectively while managing costs.

How Small Fleets Can Strengthen Their Position

Get Clarity on Your True Costs – Many small fleet owners have a general sense of their costs but lack the detailed per-mile breakdown needed for effective rate discussions. We help you understand exactly how insurance, risk management, and other fixed costs factor into your operations so you can identify your true minimum sustainable rates.

Optimize Insurance Costs for Your Fleet Size – Our team specializes in finding competitive coverage options designed for smaller operations. Even a modest reduction in insurance premiums can meaningfully impact your bottom line when operating on tight margins.

Build Safety Records That Support Better Rates – One area where small fleets can compete with larger carriers is safety performance. Strong safety records can lead to lower insurance costs and provide concrete evidence when negotiating with quality-focused customers who value reliable service. We help develop practical safety programs scaled appropriately for smaller operations.

Access Better Risk Management Resources – Large carriers have dedicated risk management departments; small fleets typically don't. We provide the expertise and resources that help level the playing field, from DOT compliance support to driver qualification programs to claims management guidance.

Understand Your Competitive Advantages – Small fleets offer unique benefits: flexibility, personalized service, direct owner involvement, and often superior communication. When rate discussions focus solely on price, small fleets lose. We help you articulate the total value you provide and identify customers who appreciate these advantages.

Plan for Equipment Decisions Strategically – Whether you're considering adding trucks as you grow or need to make difficult decisions about fleet size during slow periods, your insurance program must adapt accordingly. We ensure your coverage aligns with your current operations and provide guidance on the insurance implications of fleet changes.

Positioning for Better Times Ahead

Small fleets that manage costs effectively during this challenging period will be positioned to thrive when rates recover. Having a clear understanding of your operational costs—including insurance and risk management—helps you make informed decisions about which loads to accept, how to negotiate rates, and where you can potentially reduce expenses without compromising service quality.

The full ATRI report is available on ATRI's website, and we encourage small fleet operators to review the detailed cost breakdowns. Understanding how your costs compare to industry benchmarks strengthens your position in every customer conversation.

If you'd like to discuss how Cottingham & Butler's transportation team can help your small fleet navigate these market challenges while optimizing insurance costs and building competitive advantages through risk management, we're here to help. Our specialists understand the unique pressures facing small fleet operators and provide practical, cost-effective solutions tailored to your operation's size and needs.

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Sources:

American Transportation Research Institute (ATRI). (2025). An Analysis of the Operational Costs of Trucking: 2025 Update. Retrieved from https://truckingresearch.org/