People often ask what is the meaning of lease. It can be confusing for someone new to trucking and thinking about becoming an owner operator.
The word lease itself basically means pay a fee to use someone else's equipment. When leasing a truck, the leasing agreement can be for years or month by month walk away lease, no obligation. Payments due monthly. Know your contract.
The confusion is because the word lease is often used in conjunction with another word and each term means something slightly different.
Relax, it's not you! :-)
After reading this you will know what is meant when you hear the word lease combined with the other words or even when used by itself by how it used in context.
Here are the three major ways that you will hear the word lease used as it pertains to trucking.
1. Lease Purchase Program or Lease To Own – Many trucking companies have a lease purchase program that will allow the driver to lease with an option to buy. Terms for these contracts vary from company to company. Some are very ugly. Some are fair. Some are good.
Many drivers use this program if they don't want to invest their own money upfront to become an owner operator.
The majority of drivers enter this programs because they don't have the money to or good credit needed to become an owner operator any other way. For them this is essentially lease financing. (unofficially)
These lease purchase programs usually require no money up front and don't have a credit score requirement.
This driver is a lease operator
2. Lease Program – You could lease a truck from a company or dealership just like you could lease a car. You make monthly payments of a determined amount.
In some cases just like lease purchase, you don't have to have a down payment or good credit. However you don't intend to buy the truck. Often at the end of the agreement terms, the trucking company will lease you another new/semi-new truck.
This driver is a lease operator also
Now what will you do with this truck?
This brings us to the third term.
3. Lease on to a carrier – The relationship that you have with the trucking company that you are affiliated with is described as leasing on. You are leasing the truck on with or to that company as an owner operator.
This term even applies if you took your own truck, even if it is paid for already. It has nothing to do with description of terms 1 and 2. You are an owner operator leasing your service and truck.
By leasing it on to a carrier, what you are doing is making an agreement to render service of your truck to haul freight for which they secure. (Haul the companies loads).
To lease on to a company, in most cases you don't need your own authority. If you have it, and your own insurance, the trucking company will give you a larger percentage of the pay.
Here are some other benefits to leasing on to a carrier.
Because the company is handling all of this office work, for the owner operator. The owner operator (stated as independent contractor) agrees to let the carrier takes a percentage of the settlement paid to the O/O that hauled the load.
The amount varies from company to company . Some drivers don't like this, but it should be obvious to you that the carrier deserves to take a percentage of the settlement. They are taking care of a huge amount of the process, much of the business aspect of being an owner operator.
This driver is leased on to the company but not called a leased operator, he is simply an owner operator or independent Contractor
Now....we will get back to categories 1 and 2 the lease programs and lease to own programs.....
You will a lot of drivers saying to never lease a truck.
Others will say, never to lease from or to a particular trucking company. After you talk to enough drivers who dealt with the same company and they have the same story, you might want to take them serious. (I mean 100 drivers)
The problem is that some trucking companies are shady, ruthless, and dirty. LOL did I scare you? They seek to take advantage of drivers and squeeze as much out of them as possible.
Some companies make a lot of money on their trucks by running the drivers just enough to make the payment, but not enough to save money. At the end of the lease purchase, there is not enough saved for the final payment or the trucking company don't run them enough to make money near the end of the lease.
The trucking company takes the truck, and leases it out again. That's a lot of profit.
First of all be honest to yourself. Don't get involved in something that you will not stick with. Find out what you need to and when you make the decision, hang in there if at all possible.
Breaking a lease agreement is sometimes ugly. Some contracts are lenient and have little consequence (walk away lease). But the only way to know what you are getting into is to read it or have someone else do it.
Make sure you also check out the owner operator page.
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