More on Lease Purchase Programs
Posted on Sep 27, 2008 - 4:00am by Donna Snelling in Trucking
Table of contents for Leasing a Truck
- Lease Purchase Programs
- More on Lease Purchase Programs
The next very important thing is fuel. Does the company provide you with a fuel card so your fuel cost will automatically be deducted from your pay settlement? Most of the companies that offer leases also offer a discounted fuel price as well as a fuel card. Most generally Com data is the card of choice because not only does it serve as your fuel card but also serves as a good way for you to receive your pay.
Then you have to ask about fuel surcharge. Some companies pay you a set amount each week based on the DOE average fuel cost (say like forty-nine cents per mile just as an example). While other companies have it worked out with their shippers that they get paid so much per mile and pay that amount directly to the driver. Some may pay percentage on both regular pay (percentage of what the load is worth) and fuel surcharge as well.
A few extras to think about: if hauling for a refrigerated company – is reefer fuel paid for? Are trailer washouts paid for? Do you have to “rent” the trailer you will be using or does the company provide it free of charge? Do you get paid layover? Do you get paid short haul miles? Do you get paid for unloading or driver-assist loads? Are there fees for early termination of the lease? Are there fees for driving over a certain number of miles? Is there any chance of receiving a pay raise (such as safety bonuses)? Will you get paid detention? Is there a health insurance program you can enroll in? Is there a required amount of time that you have to be out before being able to request home time?
Is it force dispatch? I decided to put this one by itself simply for one reason, a lot of people learn that they do not HAVE to take loads if they lease a truck, though some companies offer a few more cents on the mile if you are willing to be on force dispatch. However, a lot of people seeing the opportunity to turn down loads left and right and then whine because they are not making money. Bottom line is, if the wheels are not rolling on your truck, you are not making any money. Any owner operator will agree with that statement, I do believe!
My best advice to anyone looking into this is to take the time to research everything and make sure this is something you really want to do. If you are not dedicated and not willing to run the miles put before you, you will not make it in a lease/purchase program. Instead you will be aggravated and left broke! Ask plenty of questions ahead of time. I would also suggest keeping a simple spreadsheet, remember you are running a business, that will help you keep track of costs you incur and the money you make. Instead of just guessing that you have a 1000 miles and $500 in fuel in one week that you “might” get a check, it’s best to be a little more accurate in the business end of things. I also suggest that you save as much as you can for times when freight is utterly slow. I know guys, like it’s not now right?
Owning your own truck, whether through lease purchase or direct buy, will make you appreciate all the time you spent as a company driver. Because when you are company there are so many things you do not have to worry about other than to sit and wait on your next load.
If I have forgotten anything, please add your two cents to this. I want this to be as informative as I can be, because I know lease/purchase is not for everyone. You see a lot of bad things about it on the internet, nothing ever positive. But like with everything else, if you do not work at it to make it a success, it will not be a success.
Keep the wheels rolling=a paycheck.
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Great job Donna!!
Might want to check is there is any penalty for paying off the lease (since it is a type of loan) early?
As for the Escrow Account (And Maintenance), what do you have to do to get it returned to you when you are through; and what interest rate are you getting on your money?
Don’t forget to make them quarterly’s on your self employment tax (15.2% of net).
Is there pay for extra pickups/drops?
Who pays for Lumpers?
Can you get OccAccIns through them? As they probably get a lower rate. Try to keep it under $169 per month.
Do you have to pay into a Workers Comp program?
Who insures the Trailer and Cargo? And can you get Liability Ins over your truck insurance amounts?
Talk to an accountant/attorney about the protections and tax consequences of Incorporating or setting up an LLC.
hope we haven’t missed anything. It’s a mountain of items to think about when you are considering making the leap.
Most leases do not charge a penalty for paying the lease off early – but you have to remember most have a buy out option, so you do have to worry about a balloon payment.
Escrow & Maintenance Account returns vary among companies. Escrow is usually held as a sort of “early termination fee” account. So if you terminate your lease early, the company keeps the money. Maintenance Escrow, if you have a truck then you know it does not take much to wipe that account out sometimes!
You do not get interest on these accounts. You work for a company not a bank. I have yet to see a company offer to pay interest on maintenance escrow account.
Most owner ops have an accountant to take care of the paperwork (taxes) because you don’t just look at self-employment taxes, but state taxes, social security, etc.
Most companies pay for extra stops, but not very much. They also most generally pay for lumpers.
I mentioned insurance in the first part. Not all companies can get you a lower rate, that is why some companies tell you that you have the right to look for it cheaper somewhere else. It is your responsibility to insure the trailer and cargo. YOU are pulling the cargo – not the company. Therefore YOU are responsible for it.
If you are self employed – it is up to YOU to worry about things like worker’s comp, taxes, health insurance, etc. Remember, you are not working for anyone but yourself, so that means you have to take care of those types of things, yourself.
To my knowledge most owner ops do not set up as an LLC or Incorporate UNLESS they own their equipment 100% (meaning truck AND trailer are in THEIR name – not in a company’s name). Most operate on a sole propretiorship.
I responded to your article due to your invitation
“If I have forgotten anything, please add your two cents to this. I want this to be as informative as I can be,”
I was merely trying to suggest some things for those contemplating a lease/purchase to consider obtaining information about.
As regards the “escrow” accounts:
Federal regulations governing owner-operator contracts are covered in 49 CFR Part 375 Lease and Interchange of Vehicles. The complete rules can be accessed at http://www.gpo.gov/nara/cfr (search “49CFR376″). Following are some key points
Escrow funds. The lease shall specify any required escrow funds or performance bonds, including the amount and specified items to which the fund can be applied. The carrier must provide an accounting of any transactions involving the fund with settlements or monthly statements. The lessor must be given the right to demand an accounting at any time.
While the fund is under the control of the carrier, the carrier must pay interest on the fund at least quarterly. …. The interest rate shall be established on the date the interest period begins and shall be at least equal to the average yield or equivalent coupon issue yield on 91-day, 13-week Treasury bills as established in the weekly auction by the Department of Treasury.
So while it is true that “you work for a company not a bank”, it is also true that it is your money and not theirs, and therefore they should should not be entitled to keep the interest accumulated by your money.
Also, as for ……
I think I’ll just let it drop here and propose that anyone considering this do their research beforehand and get an understanding of what items to look for, what questions to ask, and what their actual costs are going to be, so that they can make an informed decision.
Rick – I wasn’t trying to be nasty at all – just answering a few of the questions you brought up.
The companies do not necessarily always do what we consider to be right. Some companies do pay interest on the escrow accounts, but it is very little (you probably couldn’t buy a postage stamp with the interest!).
What are in the official “rules” – SHOULD be enforced. And half of the time, with the way the contracts deem a person as an “Independent Contractor”, well those rules just do not adhere to IRS rules on what a true IC is. Meaning that if you are truly an IC, you should be able to go home when you want (not once every so many days for however many days the company thinks you should go home for) just as one example. There are a lot of rules and regulations the companies do not go by, more than likely to suit their needs.
I appreciate the points you brought up. I just wish the companies would actually follow the rules but you know as a driver that will never happen!