If you have a dream of owning your own truck and enjoying the freedom of being self-employed, there may be a few roadblocks standing in your way. First off, trucks aren’t cheap. Even a used, good condition tractor is a significant investment: you can expect a reliable truck to cost more than $40,000. Most people don’t just have this kind of cash available. Although you might initially want to take out a loan to buy your truck, the banking industry’s tightening rules can make it hard for people with less-than-perfect credit to qualify for a truck loan.
If you can’t get a loan and you are still determined to own your own truck, there are three solutions to this problem:
A lease is a contractual agreement in which a leasing company (lessee) allows a customer (lessor) to use its equipment for a specific length of time (lease term). During that time, the lessor pays the lessee a set amount of money at specific times (usually monthly). At the end of the lease term, the lessor can return the equipment, continue leasing, or buy it. The specific arrangements are all set out from the very beginning of the agreement in the lease.
The advantage of a lease is that they generally require less money up front than a loan. You might be able to lease a truck with little or no money down. Your payments are generally fixed and predictable, and there may be some tax advantages involved in leasing. If you work with an independent leasing company, you can choose the type of lease that best suits your needs, so if you think you will make less money in the beginning of the lease term and more money later on, you can get a step-up lease and increase your payments over time.
The disadvantages of leasing are that if you intend to buy the truck at the end of the lease term, you may end up paying more than you would have if you had bought the truck outright. Since you are driving someone else’s equipment, you can’t modify it the way you could if it were your own. You might also have to carry extra insurance on the vehicle to protect the lessee’s investment.
Of the three routes to truck ownership mentioned previously, continuing to work as a company driver while saving money and improving your credit score is probably the slowest but most financially sound way to get into truck ownership. This arrangement will also give you time to learn about the real business side of truck ownership, and the actual costs involved.
If you just feel you can’t possibly wait that long, then leasing from third party will allow you many of the advantages of truck ownership. Since your vehicle isn’t owned by the carrier you haul for, you will have the freedom to work for different companies and leave outfits that don’t treat you right. Independent leasing companies won’t be responsible for your scheduling and dispatching, and they can’t deduct your lease payments right out of your paycheck. There are still some drawbacks: as a self-employed contract driver, your costs will be higher than they ever were as a company driver. You will have to fix anything that goes wrong with the truck, and you will have to budget for your taxes and health insurance.
Leasing your truck directly from the company you work for is a third option, and it is one you should examine very carefully before you sign. Carrier lease agreements usually offer no credit check, no down payment, and truck payments from load pay. In these arrangements, you are no longer a company driver and you are generally not eligible for health benefits, retirement planning, or income tax withholding. The company gives you a truck, and they deduct your lease payment directly from your paycheck. At the end of a set time period, you will either own the truck or you can make a single payment to close out the lease and get the vehicle. According to the Owner-Operator Independent Driver Association (OOIDA), lease-purchase agreements can spell financial disaster for truckers who sign on before they fully understand the terms of the lease.
Many things can go wrong in a carrier lease situation. OOIDA lists some of the risks on their website. In some cases, lease drivers did not get enough miles to make their truck payments, but the fact that the carrier owned the truck prohibited them from going to other companies to get work. Without enough miles, some drivers received negative checks – meaning they actually owed the company money each pay period. Truck payments may be deducted weekly instead of monthly, which takes away some control of your budget planning. Also, OOIDA reported that several drivers kept getting billed for truck payments even after they had walked away from the deal – and their lease agreement specified no penalty for returning the truck and canceling the lease.
If you do enter into a carrier lease agreement, be sure to understand what happens if your truck needs repairs. Find out if the truck is in good condition to start with, or if it will spend excessive time in the shop. When it does have problems, will you be able to work on it yourself or select your own repair shop, or will it have to be fixed in a company shop? If it must be maintained by the company, will they deduct repairs right out of your paycheck? Does the company require that a portion of your pay be set aside into a maintenance account? If it does, make sure you understand when that money can be used and what the procedure is for getting to the money. There have been cases where drivers have money sitting in a maintenance reserve, but they can only tap into it if repairs cost over $1,000. That means they have to pay out of pocket for every $950 repair.
There are certainly reputable companies out there that offer lease agreements in which drivers have a realistic chance of success. To find these companies, do serious research on potential programs. Ask around, read reliable print sources, and listen to people you trust. Most importantly, make sure you understand the real costs involved in operating your own truck, and balance those costs against realistic expectations of miles that you are likely to drive and income you are confident you can make. If there is a slim or nonexistent profit margin on paper, there will probably be a loss in real life.