Truck lease pt 2
Find out what’s in the contract — The amount of money that you will make leasing a truck from any company will depend largely on what it costs to operate the truck. In addition to the cost of the tractor lease payment, many carriers will expect you to pay:
* A deposit or a down payment (sometimes financed over a short period of time at the beginning of a lease)
* For Base Plates and permits
* For deadhead and/or bobtail insurance
* Pay for cargo insurance
* Pay for cargo insurance or accept responsibility for freight claims
* Set money aside for maintenance, towing, repairs, or tires
It’s important to note that just because a carrier has you set money aside for a specific purpose that that’s not necessarily how it will be utilized. For instance, if your tire escrow account has $1,000 in it, but the carrier requires a tire repair expense to be at least $500 before you can tap into it, you will be forced to pay most tire-related expenses yourself.
The same holds true for breakdowns and repairs not covered by any existing truck warranties. So find out what the details are before agreeing to contract provisions that could make profitability a pipe dream.
Run the numbers — Finally, before agreeing to any carrier truck lease contract, it’s critically important that you run the numbers and make sure that you will be able to make money. If you can’t make money on paper, it’s highly unlikely that you’ll be able to make it work in the real world.
The following income and expense budget will help you to decide whether you should be able to make it as a truck lease operator. While some carriers will pay for certain items, this gives you a good idea of some of the expenses that you might incur.
* linehaul revenue (mileage or percentage-based)
* fuel surcharges
* stop pay/unloading/etc.
* Fixed Expenses
* Tractor payment
* Trailer rental
* BT/DH Insurance
* Cargo Insurance
* Accounting/administrative expenses
* Variable Expenses
* Truck fuel
* Reefer fuel (if refrigerated)
* Mileage fees
* Excess mileage fees
* Truck/trailer washes/trailer washouts
* Cellular services
* Workman’s compensation insurance
* Road, fuel, usage, mileage taxes
* Cargo claims
* Lumpers/gate fees
* Scale/weight tickets
* Legal fees
* Check cashing fees
* Qualcomm rental/usage fees
how much you can expect to earn, it’s of critical importance that you have accurate (and realistic) numbers. For instance, if you base your profitability on your ability to drive an average of 3800 miles week in, week out, you will find that it’s impossible to meet that threshold if you take four or five days off in a given month.
Run several sets of numbers based on varying mileage totals to see if you stand a good chance of meeting your income needs.
Tax and insurance considerations
As a company driver, many carriers have fringe benefits — health, dental, vision, and life insurance — available for their drivers. However, most carriers will not offer the same benefits to you as a lease operator, and if they do, you won’t be able to get them nearly as cheaply as you would as a company driver. In addition, as a lease operator you will be responsible for your own retirement planning, which will come out of the ever-dwindling pool of money left over at the end of each week.
Taxes, too, will be your responsibility. Instead of your carrier deducting money from your settlement checks to cover federal and state withholding requirements, you will be required to file quarterly federal and state income tax returns, as well as to make estimated tax payments based upon those returns. Remember, too, that as a self-employed entrepreneur, you will also be responsible for paying self-employment taxes, which reflects the employer’s share of social security and Medicare taxes.
The bottom line
When you add it all up, leasing a truck will be a daunting financial endeavor under the best of circumstances. However, times are tough in the transportation industry. Some drivers have the business savvy, perseverance, and the luck it will take to survive — and thrive — in today’s trucking environment.
Unless you go into a truck lease arrangement with your eyes wide open, are aware of every minute detail, and can manage your business like a true professional, then you don’t stand a chance.
However, if you can, you might be one of the extraordinary drivers that proves that some people can succeed even in very difficult circumstances with sheer determination and a can-do spirit.
Are you one of them? If you are, this might be the deal for you. If not, or you’re not sure, your best bet is to stay behind the wheel of a company truck and take the safer, less risky path to your destination.