Independence. Flexibility. The potential for higher revenue. These are just some of the many benefits of becoming an owner-operator.
There are three types of owner-operators:
- Lease operators
- Leased owner-operators
- Independent owner-operators
If you’re interested in transitioning from a company driver to a lease-purchase owner-operator, you’ll need to understand what it takes to get your own truck. There are several ways to do this and a popular way is through a lease-purchase program.
What is a lease-purchase program?
Many truck drivers dream of someday having their own trucking business, but not all of them are financially equipped to get started.
Buying your own truck with cash can be very expensive, with the average cost of a used truck in 2018 being $40,320.
That’s the reason why lease purchase programs can be so attractive. Not only do they eliminate the need for a hefty down payment on equipment, but they also help truck drivers get past the credit constraints of ownership.
The benefits of a lease-purchase program
- Added benefits from full-service lease companies. If you hire the services of a full-service leasing company, you can take advantage of add-ons such as scheduled preventive maintenance, performance reporting, driver training, and more.
- Reduced administrative costs. Leasing from a carrier means you can still get help with specific administrative tasks. Particularly managing loads and tracking your Hours of Service. Since leased owner-operators still operate under their carrier’s IFTA license, some will have their IFTA reports and taxes managed for them by the company.
- Access to brand-new vehicles at low rates. Lease purchase programs typically allow drivers to select their own truck(s). Apart from used vehicles that come with significantly lower price tags, they can also opt for brand-new trucks and avoid hidden maintenance issues.
- Ready permits. Lastly, if a truck driver leases from a carrier and agrees to work for them as an independent contractor, the driver can expect the carrier to secure the necessary permits, license plates, and other requirements needed to get the driver on the road.
Of course, different companies have different terms. As a general rule of thumb, drivers need to learn as much as they can about the lease purchase programs offered to them and the company offering it before they make a decision.
Downsides of choosing a lease-purchase
Despite all the benefits that we’ve mentioned, being a lease-purchase owner-operator has a downside. Truck drivers are often familiar with this sentiment, especially since it’s not necessarily a secret in the industry.
Some drivers are skeptical about lease purchase programs due to dishonest carriers that may specifically design such programs to fail.
A survey conducted by Truth About Trucking, LLC polled 3,611 drivers about this topic. The majority of lease-purchase owner-operators earned less and clocked fewer miles per week than what the carrier promised when the lease-purchase program was offered to them.
One question asked respondents about the projected annual earnings carriers had initially presented. Here were the results:
- 39.2% of the respondents were promised over $100,000 in gross earnings.
- 38.1% were promised anywhere between $66,000 and $100,000.
- 22.7% were promised initial earnings of $65,000 or less.
Only 21% of drivers earned $66,000 or more, and 73% made $35,000 to $45,000.
Here are other interesting statistics uncovered in the survey:
- In terms of miles per week, 46% of the respondents only drove 1,000 to 2,000 miles on average. (That’s less than the minimum of 2,500 to 3,000 miles per week that 63% of carriers promise.)
- Out of all lease-purchase owner-operators, 44.3% rate their carrier’s support system as poor.
- An additional 18.6% stated that their company offered no support to their leases.
- 63% of the respondents claimed that the condition of the vehicle they received was rated good to excellent.
What do these figures tell us?
There’s a huge chasm between the expectations of aspiring lease-purchase owner-operators and the ground realities.
Despite the high failure rate of lease purchase programs based on the survey, plenty of drivers succeeded. According to data from the Owner-Operator Independent Drivers Association (OOIDA), 66% of owner-operators who’ve been in the trucking business for 26 years have already paid off their trucks.
Some lease purchase programs are geared towards new drivers, who may have limited experience in the trucking industry.
Some of them may be unaware of the full responsibilities of an owner-operator. As a result, they ended up with a company with policies that may have set them up to fail.
Are you ready to be a lease-purchase owner-operator?
Some experienced owner-operators advise against working with the same company that leased your truck. The reason for this is because they use a contract that may come with the terms of the lease. This means they may have control over your freight while being free from any expense that an “independent contractor” must shoulder.
Keep in mind that not all lease purchase program agreements are written the same way, which is why you should have your contract checked by an attorney. Have them explain to you the terms of your contract in layman’s lingo to make sure you have the freedom you deserve.
This includes truck maintenance and repairs. Two of the most expensive costs in running a trucking business.
Focus your lease-purchase search to companies that allow you the freedom to run and grow your business as you see fit. Schneider lets you lease your own truck without tying you to a central dispatcher.
This means you have more control over your time and the profitability of your business.
For more lease operator job opportunities, you can head to career boards like the lease operator section on Zippia.
Tips before committing to a lease purchase program
Besides looking for the right company, below are additional tips that can help you succeed in your lease purchase program:
1. Find carriers with load boards
A load board, which is also referred to as a freight board, allows you to book your own freight from the comfort of your own home or while on the road.
The first obvious option is to use the load board your carrier provides. Alternatively, you can look at third-party load boards like DAT Solutions and Direct Freight Services.
2. Accept your own loads
If you’re a leasing company’s independent contractor, you’re not obliged to accept every load they send your way.
3. Talk to other drivers
If there’s anyone who can verify the integrity of a carrier, it’s the carrier’s own lease purchase owner-operators and company drivers.
You should already have a list of contacts if you’ve been in the trucking business long enough. If not, trucking communities, such as Truckers Forum or Rate Per Mile Masters can be excellent places to start.
4. Learn about ELDs
As an owner-operator, you need to be updated on everything that goes on in the trucking industry.
For example, the ELD mandate is something that truckers can’t ignore.
An electronic logging device automatically records the Hours of Service and duty status information. As per the federal regulations. ELDs can also reduce administrative burden. That means manually doing paper logs, log auditing, IFTA reporting, and performance monitoring.
Learn more about the Motive ELD compliance solution. Also, in case you missed it, KeepTruckin is now Motive.
5. Think like a business owner
Before you sign your lease purchase program agreement, embrace the mindset of a business owner.
Remember, being an owner-operator is a whole new ballgame. This means you should be smarter with your money and be prepared to make sacrifices.
What you need is the support and understanding of your family, especially as you become more involved with administrative but essential trucking tasks. These include managing your daily driving log and booking your own loads. Just to name a few.
To become a successful lease purchase owner-operator, you need to understand what it takes to grow your business. This means drawing from your experience in the industry and the connections you’ve made.