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Many people never get to achieve their dream of owning a truck. This can be attributed to a number of stumbling blocks that usually stand in their way. For starters, trucks cost quite a huge sum of money. They are usually over $160,000.00 for new and at least $85,000.00 for second-hand. This is obviously a huge amount for the majority of aspiring truck owners. At the same time, if you considered taking a loan to finance your truck ownership endeavors, you are still going to face some challenges. For instance, you cannot access a loan unless you have an outstanding credit score.
However, all is not lost. If you still want to own a truck despite the obstacles, you can:
• Lease from a company that independently leases trucks
• Lease from a carrier with a buying option
A lease is a form of agreement bound by a contract between a customer and the leasing company. 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.
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. Later, you will still be able to step up your lease when you begin to realize substantial returns.
There are also some disadvantages that are associated with leasing a truck. 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 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, you will be saving and building your credit score. Additionally, you will have enough time to learn the dynamics of running the business.
Supposing you find this option to be unbearable and impossible for you. Then, you can still consider an independent leasing company. Leasing with 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. You will be able focus on those with which you have a positive relationship. Also, these third party dealers will not schedule your dispatch. This 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 do not 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. Only after which can you 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. You must take the time to understand the terms. There are several risks you could face as a result of these lease-purchase agreements.
One of the risks involves the limited control of 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. This means that 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.
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. 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. You can look at 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. Do the math to find out if the benefits are worth your while.
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