Freight rates are up, but so are costs. Knowing the freight cycle is important to trucking success
Trucking capacity continues to shrink, driving freight rates higher, especially on the spot market. The last time this happened — during the height of the COVID-19 pandemic — there were record numbers of new carrier registrations as employee drivers bought trucks, quit their jobs and struck out on their own.
That’s a typical response whenever trucking conditions become more favorable. You might even be considering a trucking business of your own.
Before you make that leap, however, there are some important financial realities to consider.
Credit is harder to come by.
When the pandemic bubble burst and rates fell, lenders found themselves with thousands of repossessed and surrendered trucks on their lots, unable to sell them. The losses were enormous. Consequently, many lenders tightened their loan requirements, requiring larger down payments and better credit records before approving equipment financing. Some insisted on business plans and other restrictions were put in place. It is more difficult to get financing today than it was a few years ago, and a lot more drivers will be declined.
If you get approved for a loan, you’ll need insurance in order to operate. Insurance costs have risen faster than the rate of inflation, due in part to “nuclear” verdicts, very large monetary awards to winners of lawsuits against carriers. Other liability costs such as medical and vehicle repair, have risen substantially, too. Insurance rates keep rising, yet insurers keep reporting financial losses after paying ever-increasing claims.
Trucks cost more today, and there are increased expenses for parts and maintenance, tolls, tires, etc. If you plan to hire a driver, be aware that driver pay has risen substantially.
The American Transportation Research Institute’s (ATRI) 2026 update to its Analysis of the Operational Costs of Trucking, published in July, showed costs were up across the board in 2025 and have risen farther in 2026. The total operational cost per mile, including driver pay and benefits, was $2.37 in 2025. Preliminary data shows more increase, with insurance premiums leading the way at 6.4%. Of course, diesel fuel costs have continued to rise as well.
About that diesel fuel.
Fuel surcharges can cover the additional costs, but only if you are judicious about fuel economy. The better your fuel mileage, the better your chance of breaking even or even profiting from fuel surcharges.
There is a caveat, however: Most fuel surcharges are based on the Energy Information Administration’s (EIA) weekly report of average fuel prices, released every Monday except for holidays. So, if the price of fuel changes on Tuesday, the fuel surcharge doesn’t adjust until the next EIA report the following Monday.
The U.S. war with Iran is another factor.
Not only has damage to refineries and pipelines impacted the global supply of crude oil, but there also is a developing shipping crisis. The cost of transporting the oil that makes it to the market is higher — much higher. Damaged ships and pipelines and ship owners who are avoiding volatile areas of the world are restricting the flow of crude oil, raising transportation prices significantly.
What’s driving freight rates higher?
Fewer trucks, not more freight
Today’s higher freight rates are being driven largely by shrinking trucking capacity, rather than an increase in freight demand. There are fewer trucks, due to lower sales numbers, carriers closing their doors and those remaining in business shrinking their fleets.
The capacity crunch is not due to increased manufacturing and shipping of products. There are simply fewer trucks. Tariffs, designed to bring manufacturing back to the U.S., may ultimately result in more manufacturing, but that takes time. Until it happens, reduced imports, retaliatory tariffs and trade wars actually reduce the amount of freight available to haul.
What happens when freight demand rebounds?
If the economy rebounds and freight demand begins to grow, the combination of increased shipping and limited trucking capacity could send rates soaring.
“They will surge,” explained Dean Croke, principal analyst for DAT Freight and Analytics. “Freight rates will go through the roof.”
Croke compared the potential for rate increases to the explosion that occurred during the late pandemic.
“If diesel went to $4.30 per gallon, the pre-war price, you’d be making an absolute fortune in the spot market now,” he said.
In trucking, however, while the economy isn’t always predictable, the trucking response is.
The cycle repeats itself.
“When truckers are making money, they buy trucks,” is the mantra of Ken Veith, president and senior analyst at ACT Research.
It’s true, and it’s cyclic. Rates go up, carriers buy more trucks to take advantage. Drivers decide to become owner-operators, so they buy trucks, too. As more trucks enter the market, there’s more competition for loads, pushing rates downward. Eventually, rates are so low that carriers slow up truck buying. Owner operators who were just getting by start selling their trucks and getting company driver jobs again.
Make the most of the freight cycle.
If you’re tempted to buy a truck and start up your own company, understanding the truck-freight cycle is critical to your success.
Investing in equipment that helps you take advantage of fuel surcharges is a good start. Larger fleets invest in fuel-saving technology, but owner-operators can benefit from many of the same strategies, including:
- Aerodynamic equipment: Tractors and trailers designed to reduce wind resistance and improve fuel efficiency.
- Fuel-efficient engines: Powertrains designed to deliver more power while consuming less fuel.
- Fuel-saving accessories: Tractor and trailer components that help reduce fuel consumption.
- Auxiliary power units (APUs): Equipment that reduces the need to idle the main engine while providing power for heating, cooling and other needs.
The idea is to help you keep more of the revenue you earn. When freight rates are high, that allows you to save more cash. When rates return to low levels — and they will — keeping fuel and other costs low can help you remain operational until rates rise again.
An alternative that some truck owners follow is to invest sparingly, buying older, cheaper equipment and then running hard to take maximum advantage of higher freight rates. The advantage is that when rates go down, it’s easier to shut down the business. The truck can be sold cheaply or simply parked. The downside is the risk – older trucks generally cost more in maintenance and a catastrophic breakdown is more likely.
Each individual must decide when the time is right to invest in equipment and become a carrier. Learning as much as you can about market dynamics can mean all the difference between starting up the next mega-carrier and a short stint as a failed owner-operator. Good decisions and smart management are keys to success, regardless of market conditions.
Cliff Abbott is an experienced commercial vehicle driver and owner-operator who still holds a CDL in his home state of Alabama. In nearly 40 years in trucking, he’s been an instructor and trainer and has managed safety and recruiting operations for several carriers. Having never lost his love of the road, Cliff has written a book and hundreds of songs and has been writing for The Trucker for more than a decade.
