What is the meaning of lease

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.

For both the lease purchase (lease to own) and the lease program you usually do so with the intention (and a contract) to haul for the trucking company that you are leasing it from. (Although you can also lease from a leasing company which may or may not allow you to lease to put the truck on to any trucking company that you want. However, some leasing companies are owned by trucking companies. Yes I know....it can get confusing) At this point, you are paid and said to be treated as an owner operator (a.k.a. independent contractor). The catch is that at some trucking companies, there are rules and regulations which makes you question if you are really treated as an owner operator. There is good and bad as with anything else. If you leased the truck from a truck dealership you could take the truck wherever you wanted to go. Also...

  • You might already need to have a guarantee in place from a trucking company that you will haul freight for before the dealership will let you lease a truck from them.
  • You might need a down payment.
  • There might be certain credit requirements
Alternatively, there are finance companies now that specializes in truck financing that may have easier qualifying requirements. There interest rates will be higher and you end up paying a lot more than the truck is worth. However, the monthly payments are sometimes lower. So you have to weigh your options against your personal situation. People like me (lol, I just caught myself this time...) will tell you not to do that and do it this way, but reality is that YOU must decide what is best for you, based on what is available to you.

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.

When you have a truck even if it is paid for, you can get your own authority and truly drive for yourself. In this you would find your own freight (loads) and do your own paperwork. Or....you can "lease it on to a carrier (trucking company).

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.

  • The company find freight for you and provide dispatching service
  • The company does the paperwork
  • The company handles fuel taxes
  • The company arranges insurance (although you pay them back for it in most cases)
  • The company provides maintenance at their shop (with good program at a reduced rate)
  • Some up front expenses can be taken out of your settlement spread out over time.

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.....

What is the problems with lease 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.

Some Important thoughts about leasing a truck

  • You need to make sure you are committed to trucking. You can't just chase the money. You have to love driving because you are signing legal document to put out a lot of money for at least a few years. You have to drive in order to make the payments.
  • You can't take time off like you are a company driver, unless you have done the numbers and know that you can. Even though the company that you will lease on to is handling a lot of the office work, it still is a business. You have to save your own tax money and pay it quarterly. You can find help here with TurboTax.
  • You have to save money for emergencies.I mean it truly is a business. Many of the owner ops who say that there is no money simply did not first do the numbers and second did not handle their business like it was a business.(This is why I said talk to 100 hundred drivers, not 10 to get their feedback on a company)
  • You have to find out the information needed about the trucking company that you will lease on to. Ask drivers who are already leased on to the trucking company. Find out what the average owner operator/independent contractor makes per year with the company too.

New! Comments

Have your say about what you just read! Leave me a comment in the box below.

Ideally, it would be nice to drive for a company before leasing a truck from or leasing a truck on to a trucking company. This will give you time to see how the company treats the drivers and owner ops in particular. It gives you real numbers and info to work with because you can meet a lot of drivers and strike conversations to see how they are doing. This will really tell you if you want to move forward with that trucking company.

Important Tips for Leasing a Truck

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.

  • Ask questions about extra charges
  • Keep your records and all paperwork
  • Find a good accountant familiar with trucking.
  • Read your contract
  • Save extra money for emergencies
  • Save extra money for expenses (repairs, tires, )
  • Note: The tax rules are different for leasing and buying

Make sure you also check out the owner operator page.

Becoming an Owner Operator
Getting Your Own Authority

What does the term lease mean?
Types of Trucking Jobs

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