Independence, flexibility, and a lot of earning potential, 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 ever thought of becoming a lease purchase owner-operator, this is the right post for you.
In this post, we share a few tips that truck drivers can use to have a smooth transition from being a company truck driver to becoming an owner-operator — particularly by leasing their own trucks.
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.
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.
Following are a few 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 like 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. Apart from used vehicles that come with significantly lower price tags, they can also opt for brand-new trucks and avoid hidden maintenance issues.
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 that are offered to them (and the company offering it) before they make a decision.
However, despite all the benefits that we’ve mentioned, being a lease purchase owner-operator has a downside to it. Truck drivers are often familiar with this sentiment, especially since it’s not necessarily a secret in the industry.
The truth is, a lot of drivers are skeptic about lease purchase programs due to the existence of dishonest carriers that specifically design such programs to fail. According to a survey conducted by Truth About Trucking, LLC, which involved a total of 3,611 respondents, the majority of lease purchase owner-operators earn less and clock fewer miles per week than what the carrier promised when the lease purchase program was offered to them.
One question focused on the projected annual earnings carriers initially presented their drivers. 39.2% of the respondents were promised over $100,000 in gross earnings, 38.1% were promised anywhere between $66,000 and $100,000, and the remaining 22.7% were promised initial earnings of $65,000 or less.
Unfortunately, only 21% of drivers actually earned $66,000 and above. 73%, on the other hand, only made $35,000 to $45,000.
Here are a few more interesting statistics uncovered during the survey:
- In terms of miles per week, 46% of the respondents only drove 1,000 to 2,000 miles on average. That’s already 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 lessees.
- The silver lining is that 63% of the respondents claimed that the condition of the vehicle they received could be rated from 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.
If you’re one of the many drivers who failed to pay off their leased vehicle, no one can blame you for thinking that all carriers offering lease purchase programs are scammers. This, however, isn’t necessarily true.
Despite the high failure rate of lease purchase programs, there are plenty of drivers who succeeded in this venture. In fact, 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.
Remember that most lease purchase programs are geared towards new drivers, who have very limited experience in the trucking industry.
Most of them were caught ill-prepared — unaware of the responsibilities of an owner-operator. As a result, they ended up with a company with policies that pretty much set them up for failure.
Are you ready to be a lease purchase owner-operator?
Many experienced owner-operators advise against working with the same company that leased your truck.
Remember, a lot of dishonest carriers use contracts that bind you to them throughout the term of the lease. In other words, they still have full control over your freight while being free from any expense that you, as an “independent contractor,” must shoulder yourself.
This includes truck maintenance and repairs — two of the most expensive costs in running a trucking business.
The worst-case scenario is when you’re about to complete the terms of the contract, and the carrier suddenly runs out of freight for you.
Unlikely? Yes — but it can happen, especially if you’re unfortunate enough to strike a deal with a dishonest carrier.
That’s why, as a would-be lease purchase owner-operator, be careful only to seek out companies that allow you to make the most of your trucking business. Schneider, for example, 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 freight board, allows you to book your own freight from the comfort of your own home or while on the road.
2. Accept your own loads
If you are a leasing company’s independent contractor, you are not obliged to accept every load they throw your way.
Of course, 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.
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, like Truckers Forum, 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.
The ELD mandate, for example, is something that truckers cannot 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, like manually doing paper logs, log auditing, IFTA reporting, and performance monitoring.
The good news is that purchasing an ELD for your new truck doesn’t have to be expensive. For instance, the KeepTruckin ELD — which is the highest-rated ELD solution by drivers like you — starts at just $20 per month with no additional charges.
5. Think like a business owner
Before you sign your lease purchase program agreement, forget the idea that you’re just a truck driver and adopt 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 — particularly when it comes to your time at home.
Let’s face it, you cannot run a profitable trucking business if you intend to spend every weekend at home — at the onset, at least.
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, booking your own loads, and so on.
If you’ve been a company driver for years, you’d have already known the ins and outs of the industry.
To become a successful lease purchase owner-operator, you need to draw from the experience you acquired, the connections you built, and the industry know-how you established.