New Article From Old School About Buying Or Leasing A Truck

Topic 20161 | Page 11

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Old School's Comment
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So even if you finance your truck independently (much cheaper than a company lease) and then lease out to one of the big companies (they can provide you with all the loads you can handle) you still can't make significantly more than a company driver?

Hello Milton, and I would normally welcome you to our forum, but it looks like you've been a member for almost three years already. I am so glad we finally came up with a topic to bring you out of the shadows! Your first post, and it is on a hot button topic!

Inevitably, when ever we have one of these discussions there is someone who thinks they have a novel idea on how to accomplish this goal of squeaking out a little more money than a good solid company driver as an owner/operator or a lease operator. And Bingo, it is almost always right in the same category you asked about - the financing end of things. It is funny because we have heard some people say something like this: "I am going to pay for my truck with cash, that way I won't have the constant drain of the truck payment working against me."

You asked a legitimate question, but it still gets the same response from me as the cash buyer. An expense in business is still an expense. Doesn't really matter how you go about it. Borrowing money is historically cheaper right now than anytime I can remember in my almost sixty years. There are several big issues in this business that keep it challenging. It is a commodities business - the cheapest price gets the jobs, and there is a ton of pressure from the many competitors that keep downward pressure on the freight rates. It also is an asset based business whose chief asset happens to depreciate at an alarmingly fast pace. I once owned a small fleet of trucks. I only ever bought two trucks that were brand new, the rest of them I bought used. It always amazed me at what I had to pay for the trucks when compared to what I could sell them for. As you use them to earn a living they are decreasing in value rapidly.

Let's say I bought a really worn used truck for $25,000. I understand I am going to have to pay higher maintenance bills on it because there is certainly no warranty on anything on that truck. I use that truck for about four years, and then I want to sell it. Now I find out that I can only get about $8,500 for the truck! Do you see what that means?

Let's break it down... The profit margin on average when taking all things into consideration in this industry runs around 3%. This can be verified by looking at some of the Financials of the big players in the business and taking an average of how they are doing - after all, that is who you will be leasing onto. Now let's say I was doing pretty good at it and making 3% more than the average driver out there. Now I have got to calculate my losses on the investment in the truck against the extra 3% of the money I thought I was making. Amortize that out over about four years and I have now got to subtract about $4,125.00 per year from that salary, and I am not even giving you an estimate related to the maintenance expenses.

I am not going to say it can't be done, and I have just barely touched on the many problems involved in the whole process. There are certain little niche markets that flat-bedders can get into that help with the rates, but you won't be doing that by being leased onto a large carrier. Even the little niche markets end up changing quickly due to pressure from others bidding on the work. It is just a tricky business to be in, and in our opinion you are much safer to learn your craft and execute it daily like a true professional out here letting others take the worry and the stress of the financial end of things. I have yet to meet anyone who was really thrilled with the fact that they were experiencing a completely new dynamic in this business by taking on the ownership of their own truck. Most of them are doing about the same as a great company driver, only they have a lot more things to take care of and a lot more weight on their shoulders on a daily basis.

If there were some secret way to break the chains that bind this business into it's current profit trends, I would be right out there doing it myself. Trust me, I have looked into it extensively. I have always loved being self employed. The problem I have run into is that I can't see the path to success at this as the owner.

I will tell you this though, a great company driver gets treated like a king! I am serious about that statement. I get anything I ask for, as long as it is reasonable, and I get the greatest respect from the folks in the office. They know that I am out here getting it done, and that makes all the difference in the world for them in their universe. Great company drivers have a lot of leverage, and that is where you make this job come out really well for you.

HOS:

Hours Of Service

HOS refers to the logbook hours of service regulations.

OWI:

Operating While Intoxicated

Burkley B.'s Comment
member avatar

This was a fantastic article old school. I personally will never lease or buy a truck. My dad happens to be a owner op but he has been doing the same thing (specialty government loads) for the last 20 years. He said it's the only reason he was as successful as he was. I'd rather know I'm getting a paycheck each week as long as i work instead of wondering if I'm gonna be able to pay this week's bills.

Chris L.'s Comment
member avatar

Screenshot_20171012-101958.pngScreenshot_20171005-214010.png

I'm showing my personal experience as an Owner Operator. I understand that 6 months in and posting a couple weeks worth of pay doesn't mean success.

I just want to show real numbers so far.

My lowest week pay and my highest week.

My low week was a 1200 mile week all local deliveries. A 5 day week in witch I was off work around 1300-1500 every day and starting around 0600.

My highest week was a 7 day week where I spent the whole week on the road and was 4100 miles.

I figured out my average weekly pay to be $2717.60 for the six months.

The net pay is what I deposited into my bank. It is after fuel, insurance's, plate fees, fuel tax, ect. I have to pay quarterly tax estimates, maintenance and repairs, and my truck payment out of the net.

I do a PM service about every 6 weeks usually at a TA for about $250. I've purchased 4 drive tires over the 6 months at around $300 per tire. Two were unrepairable flats and 2 were worn out. Fixed a couple air leaks myself parts were around $20 for the minor air leaks. Just replaced the batteries myself for $540.

So far nothing to bad but I do have a good emergency fund in place.

I know Owner Operator is a bad word around here so I tried my best to only state facts and real numbers that I can attest to.

Only time will tell if I made the right choice but I'm happy so far.

Owner Operator:

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

OWI:

Operating While Intoxicated

Old School's Comment
member avatar

I know Owner Operator is a bad word around here so I tried my best to only state facts and real numbers that I can attest to.

Only time will tell if I made the right choice but I'm happy so far.

Chris, we get misunderstood a lot about this subject. Neither Brett nor I consider being an Owner Operator as being something "bad." We just think it makes no economic sense. We see it as a poor choice strictly from a financial point of view.

Why expose yourself to all the financial risks when you won't make any more money than a good solid company driver? That's our position. In trying to defend and prove that point is where people get to thinking we're nuts.

To me your net pay looks like it is decent but a little less than I am netting as a company driver who is already having his income tax withheld and 15% going into a 401k. My question is:

How much of it are you saving each month to prepare for the inevitable need to replace your worn out truck in about five years?

Owner Operator:

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

Old School's Comment
member avatar

Sorry Chris, I forgot this...

You stated that you are sharing "real numbers." We can hardly figure this as "real" without knowing what your original investment was, and your plan to replace your aging equipment.

Actually there is a lot missing here if we are going to consider these numbers real. One of the biggest scams in this business is the efforts put forward by the big players to get people into the ownership side of this stuff when those same people have very limited understanding of how accounting works.

HOS:

Hours Of Service

HOS refers to the logbook hours of service regulations.

OWI:

Operating While Intoxicated

Brett Aquila's Comment
member avatar

It's also a shame you're only posting a couple of weekly settlements, which you of all people should understand mean absolutely nothing in the end. I know you've heard me say many times that there's only one number that tells the true story and that's your net income after all deductions on your yearly Federal tax statements.

Everyone sees those big, shiny weekly numbers and they don't realize what it means to be running a business in an industry with high capital expenditures and only 3% profit margins.

Old School summed up our position perfectly:

We just think it makes no economic sense. We see it as a poor choice strictly from a financial point of view.

Why expose yourself to all the financial risks when you won't make any more money than a good solid company driver? That's our position.

Old School owned a business for 3 decades. I've owned and operated businesses for about 12 years now. Old School would be an owner operator right now if the numbers would have made sense. That was his original plan.

What I dislike the most about these conversations, what I consider "a bad word" around here, is exactly what you're doing right now. You're misleading people with big, shiny, meaningless numbers. As a business owner do you claim to be unaware of the fact that weekly settlement checks don't tell the real story? I would assume you're quite aware of that. And yet, here you are waving them around, presumably to make people believe you're making a lot of money.

Are you going to come back in March and give us that number for net income after all deductions? And the March after that? Take a photo of that section of the tax return you're sending to the Government. That's what we want to see.

Owner Operator:

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

HOS:

Hours Of Service

HOS refers to the logbook hours of service regulations.
Chris L.'s Comment
member avatar

I've deposited over $70,000 in six months. As a company driver I would maybe gross that in a year. You say you net more than 70k in six months?

As for my investment my truck was $40k. My main focus to this point was to pay some credit card debt and put away an emergency fund. I've paid off 15k that I couldn't do as a company driver and have 12k cash set aside so far. For the short time I've been doing it. As for my truck needing replacement my plan is to pay off my current truck as a next goal and have cash in hand for my next one well before it's end of life.

I'm also funding a retirement account through Fidelity.

If you're making $140k a year I say that is a rare deal for an company driver and is not the norm. Also I'm home most weekends and some weeks daily.

Brett Aquila's Comment
member avatar
If you're making $140k a year I say that is a rare deal for an company driver and is not the norm

Chris, are you really trying to tell us you believe you're making a net profit of $140,000 a year after all expenses but before taxes? And you're doing that while sitting home relaxing on the weekends?

Chris, I seriously wish you all the best. I really do. But I'm afraid you're going to have some very tough business lessons coming your way over the next few months and years, especially if you think you're going to be sustaining $140,000 in net profits per year driving around an old truck on weekdays.

Don't you think we'd all be doing that if it were that easy? Ask yourself that.

"Am I missing something here?" Ask yourself that, also.

I've owned this website for almost 11 years now. For all these years I've been saying you won't make worthwhile profits owning or leasing a truck and I've challenged people to show me their yearly net income statements all these years. Never one time has anyone ever given me that number. Never one time.

If this business was as easy as you think it is right now, shouldn't there be a long list of highly successful owner operators in here showing us their numbers? Wouldn't there be a bunch of old timers living in mansions right now, ready to help the new guys be successful at this like they were?

Ask yourself what it is you're missing right now. You believe you've found easy money as a business owner. All you did was buy a reasonably usable old truck and drive it around on weekdays. How could it be that easy to be so successful as a business owner? Why are there any company drivers at all if owning a truck makes double the net income?

Owner Operator:

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

OWI:

Operating While Intoxicated

Patrick C.'s Comment
member avatar

A couple numbers I see missing are your truck payment and estimated quarterly income. I don't know what your truck payment is, but based on the info you gave us, you should be writing Uncle Sam a roughly $15,000 chk every quarter. Remember, your tax liability is based upon your gross pay. Also as a business owner you are responsible for 100% of your social security payments. I know this from my years as a barber. Barbers are always considered private contractors. One of the reasons I stopped barbering. I got tired of paying Uncle Sam $3000 - $4000 every 3 months. So I guess I can throw my hat in the ring as a business owner. I was a barber for 3 years. Overhead in the barber world is minimal. Maybe $1,000 every month for replacement of tools and supplies. I worked for commission. I paid 25% of all sales to the shop owner. So I brought in 75% commission on sales and my tips.

Chris L.'s Comment
member avatar

I probably should have waited to post after tax time. I just been excited how it's going. Anyway $70,657.55 is the exact number that hit my bank account in 26 weeks. I can prove it with my weekly settlements.

Expenses have already been payed as far as fuel, insurance, ect. Only thing left is taxes and the truck itself (maintenance, repairs, truck note).

I can only provide my numbers I have so far. I'll post new information as it comes such as my year end results.

Not saying I'm getting rich just giving real experience. As far as everyone doing it, According to what I've heard on talk radio most people live paycheck to paycheck and couldn't afford a $1000 emergency.

Taxes are figured on adjusted income after write offs and such. I'm not a tax expert but I was a Box Truck Owner Operator for 9 years.

Truck payment is 1400 a month with 3 years left. Will pay off in half the time or better though.

I'm not saying go buy a truck today I'm just showing my experience witch is new to me and am excited about, that's all.

If my engine explodes today far from home, I'll talk about that too.

Owner Operator:

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

OWI:

Operating While Intoxicated

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