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Owner Operator vs Lease Operator question

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Mike L.'s Comment
member avatar

I am starting CDL school Monday, so I admit I don't have a lot of knowledge of the industry.

My question is in regards to a post on another forum (I'm leaving out the company details because they're not really relevant to my question). I was a business major in college and have always had an entrepreneurial mindset/spirit.

One thing that appeals to me is the ability that I can become an owner operator and have my own small business.

So, here's what I read in the forum:

The truck costs about $1000/week including the lease, and all other expenses, Fuel will cost around $.35 to $.55 per mile at $2.50 per gallon (4.5 to 7 mpg). At 2400 miles per week, the lease costs $.42 per mile, fuel costs ($2.50 pergallon at 5.5 mpg) about $.46 per mile. Add these up and you get $.88 per mile as costs. The fuel surcharge that you will be paid at $2.50 per gallon is $.25 per mile. You are paid $.84 per mile as a lease driver. You can do the math, but at 2400 miles you will make $.21 per mile. The starting company driver will be paid $.32 per mile.

Now to my question:

Do companies allow owner operators to purchase their own truck outright, or financed through a loan instead of a lease? If you have a monthly payment of $1000 instead of weekly, that equates to a little less than $.10 per mile as opposed to $.42 per mile. That's an additional $.32 per mile toward your EBITDA.

I read so many people doing these lease options, and either I do not understand the industry well enough, or they do not understand business well enough. Some of them it's VERY clear they don't understand business well enough.

The reason for my question is because my plan (as it stands now with my very limited knowledge of the industry) is to find a carrier to sign on with as a company driver. I want to stay with a carrier for 5 years while straightening up my credit and becoming debt free, and also because with most companies, I'll be 100% vested in the 401k and I will be able to roll the company match contributions over to a ROTH IRA. In this time frame, I should be able to save up ~ $100k of which I would use $75k as a down payment on a truck and the rest as business startup capital and working capital. I'm anticipating making $35-40k my first year and $40-45k the other 4 years. If I end up making more, great that just improves my position when venturing out into the realm of owner operator.

I'm going in with very low expectations, because at this moment in time, I have very low needs.

CDL:

Commercial Driver's License (CDL)

A CDL is required to drive any of the following vehicles:

  • Any combination of vehicles with a gross combined weight rating (GCWR) of 26,001 or more pounds, providing the gross vehicle weight rating (GVWR) of the vehicle being towed is in excess of 10,000 pounds.
  • Any single vehicle with a GVWR of 26,001 or more pounds, or any such vehicle towing another not in excess of 10,000 pounds.
  • Any vehicle, regardless of size, designed to transport 16 or more persons, including the driver.
  • Any vehicle required by federal regulations to be placarded while transporting hazardous materials.

Owner Operator:

An owner-operator is a driver who either owns or leases the truck they are driving. A self-employed driver.

Dm:

Dispatcher, Fleet Manager, Driver Manager

The primary person a driver communicates with at his/her company. A dispatcher can play many roles, depending on the company's structure. Dispatchers may assign freight, file requests for home time, relay messages between the driver and management, inform customer service of any delays, change appointment times, and report information to the load planners.
Brian M.'s Comment
member avatar

This is a topic we try to avoid on this website. I am a lease operator and honestly can say it's a really bad idea to start your career worrying about the business end of trucking yet. Your first year should be hard enough learning the drivers side of things let alone worry about payments, repairs and such.

I believe I am in the the small minority of new drivers who have been able to make leasing work. The learning curve is huge. Out of the 50 new drivers I started my lease with there maybe 5 of us left. So it was about a 10% success rate.

G-Town's Comment
member avatar

Mike welcome to the ranks of the "posters". To be blunt,...as a business major, you probably realize attempting to run any business you know nothing about is a recipe for failure. Trucking is like nothing you have been taught in school or have experienced thus far in life, so the failure rate is compounded. L/O and O/O should NOT be considered until you have several years of experience as a top performer.

That said, we suggest newcomers focus on these three links as a primer into their trucking career:

We are here to help if you seek further input or have questions. Good luck.

CDL:

Commercial Driver's License (CDL)

A CDL is required to drive any of the following vehicles:

  • Any combination of vehicles with a gross combined weight rating (GCWR) of 26,001 or more pounds, providing the gross vehicle weight rating (GVWR) of the vehicle being towed is in excess of 10,000 pounds.
  • Any single vehicle with a GVWR of 26,001 or more pounds, or any such vehicle towing another not in excess of 10,000 pounds.
  • Any vehicle, regardless of size, designed to transport 16 or more persons, including the driver.
  • Any vehicle required by federal regulations to be placarded while transporting hazardous materials.
Rainy D.'s Comment
member avatar

I'll just add here that some of your math is way off...the fuel surcharge fluctuates with the cost of fuel..."$1000 per week for lease and expenses" is way low (many leases are $1000 just for the truck)...and the "starter companies start at .32 CPM for company drivers" is way low too. Swift and prime pay way more than that. What you project to make as a lease with all the aggravation and expenses I made my first year as a company driver, and since enrolling in my 401k in Jan I have almost $5000 in there plus the company match of 3% & 2%. I've been solo for about 15 mos.

If you can live on the truck and cut your overhead for housing, you can save much more as a company driver than you expect and have a lot more cash flow...while still getting home time.

Newcomers get enamored with the idea of "being their own boss".(I did too) But honestly, as a company driver..I basically am my own boss. I'm given appointment times and that's about it. Do they give me routing? Yes, but if I take interstates instead of US highways, no one says anything. Do they tell me where to fuel? Yes, but so what? And most times I can re-run the fueling request and go where I want or just flat out ask. I've never been denied a fuel request (some company drivers don't even need to ask). My FM only cares about two things...always be early and don't hit anything.

Also keep in mind company drivers gets lots of bonuses...fuel bonus..safety/on time bonuses...etc.

As for home time, I take off when I want and have never been denied.

My recent check was 2988 miles. I grossed almost $1400, put $225 in my 401k, cleared $900 after all my health, life, disability, vision and dental.

Which leaves another huge gap in your calculations....the insurances. the insurance to cover a new driver is huge....which is why many companies ask for a year of driving first. The starter companies can afford it and usually self insure. The health insurance for you as an independent will be huge. As a company driver, after one year I pay about $50 per week for ALL my insurances combined...and I maxed out on the life and disability.

In addition to that.. MOST people who enter into trucking don't make it. That's a fact. So all the calculations on the planet won't matter if you can't actually drive the truck and adapt to the lifestyle. That's why I'm so happy i found this site that helped me be way more advanced than the other drivers I started with. I had more realistic expectations.

I can respect your desire to be an entrepreneur, but why not just go company first and take the major headaches out, determine if trucking is even for you and whether you can master the skills to handle it?

And one last thing...every company driver I meet here at Prime says the same thing: I make great money. I'll never go lease...why bother? Many lease ops I meet at Prime tell me they went lease so they can take off when they want, drive where they want, and have a condo. Well...I do all that as a company driver and make an average of 2cpm less than them...not including my bonuses which can pump me up above them.

Just food for thought.

Interstate:

Commercial trade, business, movement of goods or money, or transportation from one state to another, regulated by the Federal Department Of Transportation (DOT).

Fm:

Dispatcher, Fleet Manager, Driver Manager

The primary person a driver communicates with at his/her company. A dispatcher can play many roles, depending on the company's structure. Dispatchers may assign freight, file requests for home time, relay messages between the driver and management, inform customer service of any delays, change appointment times, and report information to the load planners.

CPM:

Cents Per Mile

Drivers are often paid by the mile and it's given in cents per mile, or cpm.

DAC:

Drive-A-Check Report

A truck drivers DAC report will contain detailed information about their job history of the last 10 years as a CDL driver (as required by the DOT).

It may also contain your criminal history, drug test results, DOT infractions and accident history. The program is strictly voluntary from a company standpoint, but most of the medium-to-large carriers will participate.

Most trucking companies use DAC reports as part of their hiring and background check process. It is extremely important that drivers verify that the information contained in it is correct, and have it fixed if it's not.

Rainy D.'s Comment
member avatar

I wanted to check the numbers before I posted and I only know the Prime amounts but:

Company reefer in a condo: 41.5 CPM

In a light weight 46.5 CPM

Northeast regional is an additional 5 CPM.. So a brand new company driver in a lightweight can earn 51.5 CPM.

There are dedicated routes with guarantee pays of $1200-$1300 per week and more home time (weekly or biweekly).

Plus bonuses and detention pay. And not have to worry about one accident that causes $15,000 in damage in addition to hotels or transportation home while not getting paid. Or a $10,000 repair bill that was not under warranty.

Dedicated Route:

A driver or carrier who transports cargo between regular, prescribed routes. Normally it means a driver will be dedicated to working for one particular customer like Walmart or Home Depot and they will only haul freight for that customer. You'll often hear drivers say something like, "I'm on the Walmart dedicated account."

Regional:

Regional Route

Usually refers to a driver hauling freight within one particular region of the country. You might be in the "Southeast Regional Division" or "Midwest Regional". Regional route drivers often get home on the weekends which is one of the main appeals for this type of route.

CPM:

Cents Per Mile

Drivers are often paid by the mile and it's given in cents per mile, or cpm.

Reefer:

A refrigerated trailer.

Eric G.'s Comment
member avatar

Thanks Rainy. I am finishing up TNT here soon, and this has been weighing on my mind be recently. I came intending to stay company until I have about 5 years under my belt then buying my own truck through a dealer. But somewhere along the way I got caught up in wanting to go lease.

This has reassured me that company is still the way to go.

I'll just add here that some of your math is way off...the fuel surcharge fluctuates with the cost of fuel..."$1000 per week for lease and expenses" is way low (many leases are $1000 just for the truck)...and the "starter companies start at .32 CPM for company drivers" is way low too. Swift and prime pay way more than that. What you project to make as a lease with all the aggravation and expenses I made my first year as a company driver, and since enrolling in my 401k in Jan I have almost $5000 in there plus the company match of 3% & 2%. I've been solo for about 15 mos.

If you can live on the truck and cut your overhead for housing, you can save much more as a company driver than you expect and have a lot more cash flow...while still getting home time.

Newcomers get enamored with the idea of "being their own boss".(I did too) But honestly, as a company driver..I basically am my own boss. I'm given appointment times and that's about it. Do they give me routing? Yes, but if I take interstates instead of US highways, no one says anything. Do they tell me where to fuel? Yes, but so what? And most times I can re-run the fueling request and go where I want or just flat out ask. I've never been denied a fuel request (some company drivers don't even need to ask). My FM only cares about two things...always be early and don't hit anything.

Also keep in mind company drivers gets lots of bonuses...fuel bonus..safety/on time bonuses...etc.

As for home time, I take off when I want and have never been denied.

My recent check was 2988 miles. I grossed almost $1400, put $225 in my 401k, cleared $900 after all my health, life, disability, vision and dental.

Which leaves another huge gap in your calculations....the insurances. the insurance to cover a new driver is huge....which is why many companies ask for a year of driving first. The starter companies can afford it and usually self insure. The health insurance for you as an independent will be huge. As a company driver, after one year I pay about $50 per week for ALL my insurances combined...and I maxed out on the life and disability.

In addition to that.. MOST people who enter into trucking don't make it. That's a fact. So all the calculations on the planet won't matter if you can't actually drive the truck and adapt to the lifestyle. That's why I'm so happy i found this site that helped me be way more advanced than the other drivers I started with. I had more realistic expectations.

I can respect your desire to be an entrepreneur, but why not just go company first and take the major headaches out, determine if trucking is even for you and whether you can master the skills to handle it?

And one last thing...every company driver I meet here at Prime says the same thing: I make great money. I'll never go lease...why bother? Many lease ops I meet at Prime tell me they went lease so they can take off when they want, drive where they want, and have a condo. Well...I do all that as a company driver and make an average of 2cpm less than them...not including my bonuses which can pump me up above them.

Just food for thought.

Interstate:

Commercial trade, business, movement of goods or money, or transportation from one state to another, regulated by the Federal Department Of Transportation (DOT).

Fm:

Dispatcher, Fleet Manager, Driver Manager

The primary person a driver communicates with at his/her company. A dispatcher can play many roles, depending on the company's structure. Dispatchers may assign freight, file requests for home time, relay messages between the driver and management, inform customer service of any delays, change appointment times, and report information to the load planners.

CPM:

Cents Per Mile

Drivers are often paid by the mile and it's given in cents per mile, or cpm.

DAC:

Drive-A-Check Report

A truck drivers DAC report will contain detailed information about their job history of the last 10 years as a CDL driver (as required by the DOT).

It may also contain your criminal history, drug test results, DOT infractions and accident history. The program is strictly voluntary from a company standpoint, but most of the medium-to-large carriers will participate.

Most trucking companies use DAC reports as part of their hiring and background check process. It is extremely important that drivers verify that the information contained in it is correct, and have it fixed if it's not.

TNT:

Trainer-N-Trainee

Prime Inc has their own CDL training program and it's divided into two phases - PSD and TNT.

The PSD (Prime Student Driver) phase is where you'll get your permit and then go on the road for 10,000 miles with a trainer. When you come back you'll get your CDL license and enter the TNT phase.

The TNT phase is the second phase of training where you'll go on the road with an experienced driver for 30,000 miles of team driving. You'll receive 14ยข per mile ($700 per week guaranteed) during this phase. Once you're finished with TNT training you will be assigned a truck to run solo.

Mike L.'s Comment
member avatar

Thanks for the info and input, Rainy. I guess I didn't do a good enough job making it clear the numbers were not mine, and they were from another forum I read.

What I was trying to ask was if an owner operator can just buy a truck outright instead of leasing a truck. My plan is to remain a company driver for at least 5 years. I admit I don't know much about the industry, so I don't know if the numbers I quoted were accurate or way off.

I'll just add here that some of your math is way off...the fuel surcharge fluctuates with the cost of fuel..."$1000 per week for lease and expenses" is way low (many leases are $1000 just for the truck)...and the "starter companies start at .32 CPM for company drivers" is way low too. Swift and prime pay way more than that. What you project to make as a lease with all the aggravation and expenses I made my first year as a company driver, and since enrolling in my 401k in Jan I have almost $5000 in there plus the company match of 3% & 2%. I've been solo for about 15 mos.

If you can live on the truck and cut your overhead for housing, you can save much more as a company driver than you expect and have a lot more cash flow...while still getting home time.

Newcomers get enamored with the idea of "being their own boss".(I did too) But honestly, as a company driver..I basically am my own boss. I'm given appointment times and that's about it. Do they give me routing? Yes, but if I take interstates instead of US highways, no one says anything. Do they tell me where to fuel? Yes, but so what? And most times I can re-run the fueling request and go where I want or just flat out ask. I've never been denied a fuel request (some company drivers don't even need to ask). My FM only cares about two things...always be early and don't hit anything.

Also keep in mind company drivers gets lots of bonuses...fuel bonus..safety/on time bonuses...etc.

As for home time, I take off when I want and have never been denied.

My recent check was 2988 miles. I grossed almost $1400, put $225 in my 401k, cleared $900 after all my health, life, disability, vision and dental.

Which leaves another huge gap in your calculations....the insurances. the insurance to cover a new driver is huge....which is why many companies ask for a year of driving first. The starter companies can afford it and usually self insure. The health insurance for you as an independent will be huge. As a company driver, after one year I pay about $50 per week for ALL my insurances combined...and I maxed out on the life and disability.

In addition to that.. MOST people who enter into trucking don't make it. That's a fact. So all the calculations on the planet won't matter if you can't actually drive the truck and adapt to the lifestyle. That's why I'm so happy i found this site that helped me be way more advanced than the other drivers I started with. I had more realistic expectations.

I can respect your desire to be an entrepreneur, but why not just go company first and take the major headaches out, determine if trucking is even for you and whether you can master the skills to handle it?

And one last thing...every company driver I meet here at Prime says the same thing: I make great money. I'll never go lease...why bother? Many lease ops I meet at Prime tell me they went lease so they can take off when they want, drive where they want, and have a condo. Well...I do all that as a company driver and make an average of 2cpm less than them...not including my bonuses which can pump me up above them.

Just food for thought.

Owner Operator:

An owner-operator is a driver who either owns or leases the truck they are driving. A self-employed driver.

Interstate:

Commercial trade, business, movement of goods or money, or transportation from one state to another, regulated by the Federal Department Of Transportation (DOT).

Dm:

Dispatcher, Fleet Manager, Driver Manager

The primary person a driver communicates with at his/her company. A dispatcher can play many roles, depending on the company's structure. Dispatchers may assign freight, file requests for home time, relay messages between the driver and management, inform customer service of any delays, change appointment times, and report information to the load planners.

Fm:

Dispatcher, Fleet Manager, Driver Manager

The primary person a driver communicates with at his/her company. A dispatcher can play many roles, depending on the company's structure. Dispatchers may assign freight, file requests for home time, relay messages between the driver and management, inform customer service of any delays, change appointment times, and report information to the load planners.

CPM:

Cents Per Mile

Drivers are often paid by the mile and it's given in cents per mile, or cpm.

DAC:

Drive-A-Check Report

A truck drivers DAC report will contain detailed information about their job history of the last 10 years as a CDL driver (as required by the DOT).

It may also contain your criminal history, drug test results, DOT infractions and accident history. The program is strictly voluntary from a company standpoint, but most of the medium-to-large carriers will participate.

Most trucking companies use DAC reports as part of their hiring and background check process. It is extremely important that drivers verify that the information contained in it is correct, and have it fixed if it's not.

Patrick C.'s Comment
member avatar

Not to bust your bubble Rainy, but Dry Van do start out around .32 a mile. That is EXACTLY what I started out at. I make .33 a mile now and will make .34 a mile in another 90 days or so. At my 1 year mark I go up to .37 a mile. Realize that Prime is the highest paying "starter" company. You just get a truck that is turned way down is all.

Dry Van:

A trailer or truck that that requires no special attention, such as refrigeration, that hauls regular palletted, boxed, or floor-loaded freight. The most common type of trailer in trucking.
Brian M.'s Comment
member avatar

Rainy just to let you know some of the items about leasing are not right. For example in the case of an accident your insurance has deductible 500 for tractor 500 for trailer and 1000 for your load. So the maximum you would be 2000 on an accident.

We also get bonuses for safety, service and inspections. As far as fuel bonuses ours are directly related to yours. The better I conserve fuel the more I make. Basically I save as much as 200 a week by driving slower.

As a L/O we also get 72% of the detention that the company charges the shipper or receiver. So for this year I've collected around 2500 in detention. We also receive breakdown pay when are truck is down. If it needs to in the shop for a while they will give us a loaner as well. Prime also contributes 2500 to a retirement fund for every year of service.

Shipper:

The customer who is shipping the freight. This is where the driver will pick up a load and then deliver it to the receiver or consignee.

Rainy D.'s Comment
member avatar

Not to bust your bubble Rainy, but Dry Van do start out around .32 a mile. That is EXACTLY what I started out at. I make .33 a mile now and will make .34 a mile in another 90 days or so. At my 1 year mark I go up to .37 a mile. Realize that Prime is the highest paying "starter" company. You just get a truck that is turned way down is all.

I didnt say all...I was pointing out that not all company drivers start that low.

Dry Van:

A trailer or truck that that requires no special attention, such as refrigeration, that hauls regular palletted, boxed, or floor-loaded freight. The most common type of trailer in trucking.
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