Lease Operators

Here is an article from 2011....From Overdrive Online

I am looking for a more recent article. I have the magazine article at home, but can not find it online. Will post it when I find it.

Dave

Here is a topic I posted 6 months ago:

Lease-purchase: Sounds like a good deal, right?

This story was published by the Business Services Department of the Owner Operator Independent Drivers Association (OOIDA). If they don't think well of Leasing you should take notice.

Here is a topic I posted 6 months ago:

Lease-purchase: Sounds like a good deal, right?

This story was published by the Business Services Department of the Owner Operator Independent Drivers Association (OOIDA). If they don't think well of Leasing you should take notice.

That was the article I was looking for.

Basically, it hasn't changed much over the years.

If you are going O/O or Lease-Operator, you need to make sure that you read the fine print, and make sure that you have as much control over that truck as possible.

My former trainer went lease-operator with a company, and the lease was terminated because of one speeding ticket. She has her own truck outright and hauls flatbed in the southwestern United States.

Dave

Earlier, I said that was the article. I was wrong, there is one that is more recent, in the August/September issue of Landline Magazine, titled...

"The odds are in favor of the house."

It basically is a rehash of the previous articles written about lease-operators.

Dave

Earlier, I said that was the article. I was wrong, there is one that is more recent, in the August/September issue of Landline Magazine, titled...

"The odds are in favor of the house."

It basically is a rehash of the previous articles written about lease-operators.

Dave

The odds are in favor of the house

Basically, if you are looking at leasing, then maybe Landstar might be a better bet, because I think ALL of their trucks are lease trucks. The playing field is pretty much even.

Even then, I am sure the hard charging drivers get the better runs.

Dave

It's my opinion that leasing operating should be illegal. The problem is the situation isn't quite bad enough to make it illegal.

The essential theory and practice behind lease operators is used in other industries as well. You may have heard about how chicken farmers were turned into this same situation by strong arming distributers in the old movie "food inc." The distributors require the farms to use very specific equipment, equipment only they sell or rent. They are also required to use the food that the distributor sells. After everything is added up, the chicken coops are giving most of their money back to the distributor instead of earning it from them, and it's so costly that exiting the business would have pretty bad consequences effectively trapping them. It's a dream come true for the company. All the money, none of the risk. Companies love having people trapped like this. It's a nice problem for the retention problem. Also it creates a stronger position of control where you can give individuals LESS work than you would if they were a company driver, and them still stick around, because they can't necessarily afford to leave. Lease operators have to pay the truck bill, the maintenance, the fees and permits, everything related to the truck, and it's messed up that in the end, the original company still owns the truck the grand majority of the time because they set you up with a massive final payment or otherwise to prevent from you being able to buy it. So not only have you paid for their truck for them, paid for their repairs, in the end you don't really make much more money than a company driver for all the extra risk, and that's if you make more at all.

Their are also several economies of scale that the companies benefit from that you won't necessarily benefit from. For example, repair shops. My company has it's own repair shops just like most other large ones. This saves them a lot of money on the cost of repairs. Even if they repair the truck at their shops, you aren't going to get the baseline price. It's going to be about the same as going to a dealership. Get ready to open up that wallet wide my man. To date i've heard 3 horror stories of overhauls required or other similar problems costing 20k-30k and shutting down the truck for a month. Even simple things like fuel. The large companies receive massive kickbacks on fuel costs by sticking with one or two vendors. You don't get these benefits as an individual. So you might make more money on your own, but you're also spending a lot more on even daily tasks.

I met a prime lease flatbedder who i was talking mildly with about the risk of doing it versus company, to which he seemed oblivious of any risk at all, and i happened to ask about the cost of all of the securing equipment. I want to say it was something like 1500$ and his reaction to it was, "yea but i already paid that off in the first few weeks, no big deal." That's how it starts. They slowly tag on expenses and costs, repair bills, that seem like no big deal until you're underwater and can't sleep at night because you don't know what to do.

Guyjax used to shine light on this leasing problem all the time by posting about his completed lease programs and how worthless they were when you look at the net earnings. The problem i've often found with the guys that claim to have massive success is they are never willing to give you their net earnings but their gross which is meaningless alone.

For what it's worth i think owning a truck is a different barrel. At least if you own the truck outright you aren't paying interest on the money owed and so the only loss there is the devaluation of the truck and the opportunity cost of the money involved which i believe is better than the average in the current market, and so it can possibly be more profitable. Then again that only works if you buy a truck that's isn't prone to constant breakdowns, and that's a very expensive up frost cost. I like trucking, but if i have a spare 150k laying around i think it might be better off in a index fund, and that's even in this currently ****ty stock environment.

So to sum up, for lease operating, the companies are preying on your desire to earn big bucks, be completely in control, and to own something to put you in a really submissive and high risk position while leaving them in a pure profit position. Under no circumstance will i ever lease a truck. Ever.

James R. I think you are spot on about leasing, maybe not about index funds, but leasing is a definite trap. It is awful that companies would base their business model on taking contractual advantage of others. People like that are nothing but leeches in my book, surprised that it has not been litigated yet. As for index funds, the way to come out ahead in that game is to re-invest the dividends and keep the money in there as long as you can, generations if possible, then James R junior junior junior, would have a real sizeable account. This too assumes that the US stock market does not experience a stagnation like Japan, where for the last 25 years it has done nothing but be underwater from it's high.