What FAF actually is
FAF — the fuel adjustment factor — is a surcharge, usually quoted in cents per tonne or as a percentage of the freight rate, that moves with the price of diesel. Your rate card says $18.50 a tonne for AP40. The FAF says "plus 42 cents a tonne while diesel sits at X". When diesel drops, so does the FAF; when it spikes, your margin doesn't take the whole hit.
It exists because rate cards live for months or years, but fuel prices change every week. Someone has to absorb the difference. FAF is the agreed way to share it, instead of renegotiating a rate card every time the fuel companies sneeze.
How it's calculated
There's no single legal formula — FAF is whatever your contract says it is, and that's the first thing to check. The common shape in NZ cartage:
- Pick a base fuel price that your rates were quoted against.
- Each billing period, look at the current average diesel price (typically from published weekly diesel price data).
- Work out the movement: if diesel is 12% above the base, the FAF is roughly 12% of the fuel component of your rate — or a flat cents-per-tonne figure you both agreed to.
The honest version of this is simple: whatever formula you agree with the client, write it down, apply it the same way every month, and show your working. FAF arguments are almost never about the price of diesel. They're about a formula applied inconsistently.
Where it goes wrong on paper
- It gets forgotten. The rate card is typed once with $18.50 and the FAF column is left blank, so the surcharge becomes a monthly negotiation.
- It gets applied to the wrong clients. Some contracts carry FAF, some don't. One rate card for everyone means you're either under-charging someone or over-charging someone.
- It's applied to the wrong base. FAF on the cartage rate but not on the product cost — for an aggregate trader, the pit price moves with fuel too.
A fuel surcharge you have to remember to add is a fuel surcharge you don't have. It has to live in the rate, not in your head.
How Cartage Core handles it
In Cartage Core, FAF lives on the rate card. Each client's rates carry their own fuel adjustment — the cents per tonne, the percentage, or none at all — and the billing engine applies it to every captured load automatically. When the factor changes, you update it once and the next invoice run picks it up. No blank columns, no monthly negotiation, no "did we put FAF on Te Awa's rates?"
The takeaway
FAF isn't a way to squeeze clients — it's the mechanism that keeps a rate card honest when fuel moves. Agree the formula, write it down, apply it consistently. Your margin and your client relationships both depend on it.
