Starting your own trucking company can be a fruitful endeavor. There are many benefits to being an owner operator, including independence, flexibility, and increased potential for profit. But there are also some downsides – a big one being the expense of a truck. After all, you can’t exactly get very far without a vehicle, and it'll come with a hefty price tag.
Prices vary greatly depending on truck age, manufacturer, and other factors, but you can expect to pay $50,000 to $150,000, and even more for a newer or higher end model. Plus, costs add up quickly when you include the added expenses of gas, registration, insurance, maintenance, and repairs. For these reasons, many drivers looking to branch out on their own opt to lease either direct from a manufacturer or with what is known as an owner operator lease agreement through a carrier. More on each of these below.
Leasing versus buying a truck
Instead of purchasing, many new owner operators begin their journey by looking for dealers or manufacturers willing to lease a semi truck to a trucking owner operator. Buying a truck outright is very expensive, so leasing can seem like a better alternative. Leasing often doesn’t require a large down payment (or one at all) and helps new operators avoid possible credit issues.
When a lease is up, the driver can trade up for a newer truck, just as you would when leasing a personal vehicle. But this does have some disadvantages, as an owner operator never gains ownership of the vehicle and typically pays higher monthly payments.
What is a lease-purchase owner operator?
Another option is what is called an owner operator lease-purchase agreement with an existing carrier. Through a lease-purchase agreement, an owner operator signs a contract for a truck under a certain set of terms and conditions. These vary depending on the carrier, but typically involve some sort of operational agreements and other terms with the possibility of future truck ownership by purchasing the truck outright at the end of the lease.
This type of agreement has both positive and negative attributes.
5 benefits of an owner operator lease-purchase program
1. Newer vehicles
Probably the most obvious benefit of this type of lease-purchase program is access to newer and better vehicles. By not paying for the vehicle outright, drivers often feel they can afford to upgrade given lower upfront costs and manageable monthly payments. Carriers provide specific truck options depending on their manufacturer relationships, offer used vehicles, or let owner operators choose their own trucks entirely.
2. Added support
Another benefit of going the lease-purchase route is the backing and support of an established carrier. As a new owner operator, this offers some peace of mind. Despite being an independent contractor, working with a carrier can have operational perks.
As an invested partner, you might even have access to some or all of a carrier’s fleet management solutions without having to foot the bill, easing some administrative and operational burdens. This could include things such as an electronic logging device (ELD) compliance solution for mandated hours of service (HOS), a fleet safety program with fleet dash cams, and more.
3. Guaranteed miles
Many lease-purchase programs come with a certain set of terms, primarily a semi-guaranteed allotment of hours per week. "Semi" meaning there can be some loopholes and these hours are usually averaged. But at the very least, you have the added cushion of allocated hours while starting to establish yourself as a new enterprise.
4. Licensing and insurance
A huge benefit of working with an existing carrier through a lease-own program is they often pay for all licensing and permit costs. A carrier may even pay for insurance or offer significantly reduced rates based on an existing relationship with an insurance company.
Another great perk that may be included in a lease-purchase program is vehicle maintenance. Some carriers offer full-service contracts, which means they assist in keeping you up and running by ensuring your vehicle is in top shape. This includes regular servicing and other preventive maintenance measures. In the event of a breakdown, they may also offer loaner vehicles, keeping you productive and on the road.
5 negatives of an owner operator lease-purchase program
1. High failure rates
Despite all the benefits, many drivers are cautious and skeptical of these types of programs for a handful of reasons, the most prominent being the possibility of dishonest carriers deliberately setting up a lease-purchase program for failure. There may be terms in a contract that make it easy to default, leading to high failure rates.
2. False promises
Carriers may also make it hard for a contracted driver to succeed by underdelivering on miles. Drivers may be promised a certain set of hours or miles and find themselves coming short. Or, perhaps they may not make as much money as the carrier led them to believe, stuck in a contract designed for failure. For this reason, it is important that drivers fully understand their contracts and exactly what they are getting into.
3. Lack of support
Although working with an established partner can come with a lot of benefits, some carriers may not be as supportive as others. As an owner operator, you want to make sure you thoroughly vet your options and develop a solid and trusted working relationship before signing any documentation.
4. Poor vehicle condition
Depending on the program, carriers may offer used vehicles to new operators. This is not entirely a downside unless the vehicles provided are in subpar working order or in worse condition than was initially stated. New owner operators should thoroughly inspect their designated vehicle before signing a contract to ensure the truck will be capable of performing as expected.
5. Vehicle and maintenance costs
Under a full-service contract, a carrier may provide regular servicing and preventative maintenance, but this often does not include catastrophic damage from a collision or other breakdown issues. Repairs can be costly, and these expenses can be challenging when trying to establish a new enterprise.
How to be a successful lease operator
Regardless of which lease purchase program you choose and the specific details of the contract, there are ways to optimize fleet operations for a better chance of success through additional fleet management solutions.
Contact us or book a demo to learn more about how our fleet management software can help improve your operational efficiency.