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THE PROS AND CONS OF LEASING A TRUCK
However, all is not lost. If you still want to own a truck despite the obstacles, you can follow one of the following two methods:
What is a lease?
A lease is a form of agreement bound by a contract between a customer and the leasing company in which the former agrees to make regular payments to the latter for a specified period (lease term). Once the lease term has come to an end, the customer is expected to either return the equipment, extend the lease term or buy it from the lessor.
Advantages of a Leased Truck
Leases are generally advantageous because they are less expensive than loans in terms of upfront payments. In fact, it is possible for one to lease a truck without any money and they also involve fixed and predictable payments. On top of that, a lease will entitle you to some tax advantages. Independent leasing companies allow you to choose a lease option that is most suitable for your needs. For instance, if you anticipate small returns in the beginning of the lease term, you can choose an option that allows you to make small payments and still be able to step up your lease later one when you begin to realize substantial returns.
Disadvantages of a Leased Truck
There are also some disadvantages that are associated with leasing a truck with the main one being the cost of the leased truck. For instance, if you choose the lease to buy option, you will realize that the cost you end up paying for the truck is actually way higher than if you had paid for it upfront. Also, your modification options for the leased truck are limited. On top of that, it could also cost you more if the dealer requires you to get extra insurance to protect their investment.
Looking at all the three truck ownerships previously mentioned, working and saving while you build a positive credit score seems to be painfully enduring. On the flipside, this is actually a very good option if you look at it from the financial point of view. By choosing this option, not only will you be saving and building your credit score but also you will have enough time to learn the dynamics of running the business.
Independent Leasing Company
Supposing you find this option to be unbearable and impossible for you, it is still okay for you to consider an independent leasing company. Leasing for a third party dealer will accord you several advantages. For instance, you will not be tied to one hauling company. Instead, you will be operating like a freelance truck driver working for different companies. This way, you will be able to avoid companies that mistreat you and focus on those with which you have a positive relationship. Also, these third party dealers will not schedule your dispatch, which means you will have the freedom to do it yourself. However, there are still some disadvantages that come with this sort of arrangement. For instance, you will incur much higher costs than a company driver. Also, you will take responsibility for all damages and maintenance costs of the truck as well as health insurance and taxes.
You can as well lease a truck from your employer. However, this is an option which you ought to do a thorough examination prior to making the decision. This is because such agreements seem very lucrative yet they can be quite disastrous to you. For instance, since you don’t go through a credit check and you are not expected to make any down payment, it is easy for you to rush into the decision of signing the papers. But, here’s the catch, the employer will exempt you from any health benefits, income tax withholding and retirement planning because you will no longer be a company driver. On top of that, lease payments will be deducted from your paycheck until the end of the lease term after which you can attain full ownership by making a single final payment to the company.
Most Independent Trucking Associations state that these types of agreements can be very disastrous if you rush into things before taking the time to understand the terms. Some of the risks that could affect you as a result of these lease-purchase agreements include limited control to one’s budget and scope of work. For instance, since the company still owns the truck, you are not allowed to work for any other external companies, so even in the event that you did not get enough miles to cover your lease payments for a certain month, you still get charged. Hence, some drivers end up with negative paychecks every other time.
Factors to consider before taking a Lease-purchase agreement
Certain questions need to be answered before you decide to enter into a carrier lease agreement. For instance, find out what happens when your truck requires some repairs but before that, ensure that you are aware of the truck’s condition. Also, find out if you will be allowed to get your own repair shop in the event of a breakdown or damages. If it has to be fixed by the company’s technicians, find out if the company will subtract the cost of repairs directly from your paycheck. Some companies set aside a portion of your money in a maintenance account but then they restrict the minimum repair costs that can be covered by the reserves in this account. So, if your company is one of them, find out when exactly it is that you access the maintenance reserves.
Before you finally decide to get involved in the business of operating your own truck, make sure you have done extensive research from reliable print sources, and ask around from trustworthy people. By doing so, you will have a better shot at succeeding in this business. Ensure that you have a deeper understanding of the actual costs of running a truck and do the math to find out if the benefits are worth your while.
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