Starting your own trucking business as an owner-operator can be a big dream. One of the main hurdles you’ll face is getting a reliable truck. Trucks are expensive, and only some in the trucking business have enough money to buy one upfront.
Lease-purchase trucking is an option if you want to work towards owning a truck while gaining valuable driving experience. However, these programs have rules, and they might not suit everyone.
Given the new Biden regulation on independent contractor classification, much has been talked about lease purchase decisions.
The American Trucking Association (ATA) strongly opposes the recent Biden Administration rule on independent contractor classification, criticizing the decision to replace a clear standard with a more complex one.
ATA President Chris Spear expresses concern about the potential negative impact on the trucking industry and workforce choice, especially for the 350,000 truckers working as independent contractors.
Despite the administration’s arguments, the ATA asserts the vital role of independent contractors in the economy, pledging to work with stakeholders to oppose the rule.
In the end, it should be well thought out by the person getting into a lease purchase program. That’s why we have a detailed guide on what you should and shouldn’t do when considering a lease-purchase trucking arrangement.
What is a lease purchase program?
Lease purchase programs are like rent-to-own plans designed for truck drivers. The trucking companies that lease and sell trucks also manage these programs.
In a lease purchase program, you make an initial payment for a truck and keep making payments for a certain time. While making these payments, you can also work for the company leasing the truck. Once you fully pay for the truck, it becomes yours, and you can use it for your trucking business.
Two kinds of lease drivers
Before we dive into the main part of this article, it’s important to know that there are two types of lease drivers.
1. A lease driver who goes for a lease purchase trucking company and uses their freight.
2. A lease driver who leases from a commercial equipment financing company and arranges their own freight.
You can choose either option, but many drivers find it simpler to lease with a trucking company, especially if they’re new to leasing.
Do’s of a lease purchase program
Stepping into the lease purchase program as a truck driver is a significant move that demands careful consideration. In this section, we’ll walk you through the essential “do’s” to set you on the right path for a successful and fulfilling journey toward truck ownership.
1. Do your homework
Before you sign a lease agreement, it’s essential to do some research and find a company that matches what you’re looking for. Check their policies on time off, the availability of freight, and the expected pay.
Leasing from a carrier means you have the support of that company. They provide tools to help you, and you’ll have access to the freight they offer. Their program will be designed based on the type of freight the carrier transports, giving you a good idea of potential earnings.
Leasing independently from a commercial equipment financing company and working for various freight clients can be challenging, especially if you’re new to leasing. While you can earn significantly more than with a carrier, there’s also the risk of earning much less.
Also, find out what kinds of trucks they offer. They might have limited options, and you’ll need to look elsewhere if you want a different make or model.
2. Go through the contract thoroughly
Review the agreement thoroughly before signing, as many drivers face financial difficulties due to overlooking terms they didn’t understand. If the contract is complex, seeking guidance from a contract lawyer is wise.
Investing in a lawyer’s expertise now, even with a small fee, can prevent potential hardships down the road. Understanding the terms and conditions ensures you know your commitments and rights throughout the lease agreement.
3. Choose a good company to work with
Leasing provides freedom, but it also brings significant responsibilities. While picking your own freight is nice, making wise choices is crucial to avoid problems. You’ll need to make decisions that benefit your business, even if it means spending more time on the road.
Before committing to a lease, thoroughly examine the leasing company and ask to review a sample lease. Ensure there are no unexpected terms or costs, and feel confident about working with the company and transporting their freight.
4. Have a bookkeeper
When you start your lease-to-own trucking adventure, having a bookkeeper and accountant is crucial. Before you begin, discuss your budget with them to get their advice on managing taxes and other business costs.
They can guide you on which expenses to track using receipts. Once you’ve set up this connection, use their expertise; after all, they are professionals for a reason.
Don’ts of a lease purchase program
Starting your journey toward truck ownership through a lease purchase program can be tricky. To make sure things go smoothly and you don’t end up facing unexpected problems, let’s explore the things you shouldn’t do. These pitfalls might hurt your wallet and your dreams of becoming an owner-operator.
1. Take your time, don’t hurry
Starting your journey toward truck ownership through a lease purchase program requires careful consideration. Don’t rush into deciding about the lease. Take your time to understand the terms and conditions thoroughly.
It’s a significant commitment, and being in a hurry might lead to unforeseen issues that can cause financial troubles or other complications down the road. Spend time checking every aspect to ensure the deal aligns with your goals and financial capabilities.
2. Don’t disregard insurance coverage
It is essential not to overlook the critical aspect of insurance coverage when engaging in a lease purchase program. Ensuring that the leased truck has comprehensive and adequate insurance coverage is important.
Neglecting this consideration can expose you to significant financial risks, especially in the unfortunate occurrence of accidents or unforeseen incidents during your trucking operations.
Having good insurance coverage acts as a protective shield, providing financial security and mitigating potential liabilities that may arise on the road. Therefore, thoroughly assessing the insurance coverage for the leased truck is a proactive step toward safeguarding your lease.
3. Don’t ignore industry trends
Staying well-informed about the latest industry trends is of utmost importance. Ignoring these industry dynamics can profoundly impact your decision-making process, influencing not only the terms of your lease but also shaping your overall business strategy.
Recognizing and adapting to emerging trends is instrumental in positioning your trucking business for success, ensuring that you are well-prepared to navigate the ever-evolving landscape of the trucking industry.
4. Don’t skip customer reviews
Conducting thorough research into customer reviews about the leasing company is crucial in the decision-making process. Disregarding valuable feedback from fellow lessees may lead to overlooking potential challenges or advantages associated with the services provided by the company.
Customer reviews offer insights into the firsthand experiences of individuals who have engaged with the leasing company, providing valuable information that can influence your choice and contribute to a more informed decision. By actively considering and analyzing customer reviews, you can gain a comprehensive understanding of the leasing company’s reputation, customer satisfaction levels, and potential areas of improvement, ensuring a well-rounded assessment before entering into a lease agreement.
May you make the best choice!
Now that you’ve gone through the do’s and don’ts of the lease-purchase in trucking, we hope it helps you make the right decision. Becoming an owner-operator through a lease purchase program needs careful thinking and smart moves. By doing what you should and avoiding what you shouldn’t, you set the stage for a successful journey. Think of it as a roadmap to owning your truck and making it big in the trucking business.
