Contract Rate
A contract rate is a pre-negotiated, fixed rate per mile agreed upon between a shipper and carrier for freight movement over a defined period, typically 6–12 months. Contract rates provide revenue predictability for carriers and capacity reliability for shippers.
In Depth
Contract freight is the foundation of large carriers' revenue. Owner-operators can also secure direct shipper contracts, typically requiring a commitment of consistent capacity (2–5 loads per week on a specific lane) in exchange for a stable, above-spot rate.
The trade-off: contract rates are set months in advance. When spot rates spike above contract rates during peak seasons, carriers are locked in at the lower price. However, during soft markets, contract rates provide a floor that protects against the spot rate collapse.
Negotiating contract rates requires demonstrating service reliability, on-time delivery, and consistent capacity. Owner-operators with clean safety records and 2+ years of experience are most competitive for direct contracts.
Usage Example
Example: 'I have a 12-month contract with a food manufacturer at $2.75/mile for 3 loads/week. Even when spot dropped to $2.00, I stayed profitable.'
Related Calculators
Related Terms
Spot Rate
A spot rate is a one-time market price for moving a specific load, negotiated at the current moment based on supply and demand. Spot rates fluctuate daily and represent the transactional freight market as opposed to long-term contract rates.
Shipper
A shipper is a company or individual that has goods to be transported and contracts with a carrier or freight broker to move their freight. Shippers are the source of all freight in the supply chain.
Rate Per Mile
Rate per mile (RPM) is the gross revenue a carrier earns per mile driven. It is calculated by dividing the total load rate by total miles (loaded + deadhead) and is the most common profitability metric in trucking.
Rate Confirmation
A rate confirmation (rate con) is a document issued by a broker to a carrier that outlines the terms of a load: pickup and delivery locations, freight description, rate, accessorial rates (detention, TONU), and payment terms.
Frequently Asked Questions
How do I get contract freight as an owner-operator?
Build relationships directly with shippers in your preferred lanes, offer consistent capacity commitments, and demonstrate a clean safety record.