Leasing...here We Go Again! Merry Christmas!

Topic 23932 | Page 3

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Old School's Comment
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Certain things are worth more than any amount of money in the bank, like relationships, family, and health.

I completely agree with you, and immediately after I posted this comment..

I'd never quit an 80 grand job for a possibly 50 grand job, but that's just me.

I realized it sounded greedy. I've actually done things for less money so that I could achieve more important objectives than the income. I congratulate you on being level headed and going for what you want and/or desire in your life and career. Kudos!

I'll bow out as the representative whipping boy on the topic since I don't have much ground to stand on it seems.

We weren't trying to use you as our "whipping boy." You did present a good bit of false ideas without realizing it though. It sounds like you got educated by lease/operator trainers, and hadn't even caught on to the reasons why they were needing to be trainers in addition to all that money they were supposedly making as lease/operators. It's unfortunate how so many lease/operators are trainers. They spread their misunderstandings of how you succeed at this to each of their trainees.

You also couldn't give us real numbers. You extrapolated your own pay, and that's how you left it. That's always been the case in these discussions, and it's really frustrating for us to have to point it out all the time. Otherwise we wouldn't be pushing back. We want people to know the facts. It's difficult to argue against facts, but both tempting and misleading to believe statements that are not based in fact

Hey, we all hope you have great success in your new gig. You seem like a really smart guy who is committed to doing a great job. That is worth a lot in this business. Congratulations on that new job! Keep us posted on how it's going.

Brian's Comment
member avatar

Yes Old School it makes sense. With your response came about 4 other questions now but I'll ask one more. G-Town mentioned:

"All equate to a higher per mile profit for the carrier."

So I'm understanding that the carrier essentially pays little to nothing to the operator as far as maintenance and everything goes. So where exactly are they making money besides that? The company pays a percentage? If that makes sense what I'm asking.

G-Town's Comment
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Yes Old School it makes sense. With your response came about 4 other questions now but I'll ask one more. G-Town mentioned:

"All equate to a higher per mile profit for the carrier."

So I'm understanding that the carrier essentially pays little to nothing to the operator as far as maintenance and everything goes. So where exactly are they making money besides that? The company pays a percentage? If that makes sense what I'm asking.

Deadheading (empty miles), zero burden for carrying an employee, zero fuel cost and zero cost for truck downtime. Also a L/O has no insight into the actual freight rate charged to the customer.

It’s a one-sided deal.

Deadhead:

To drive with an empty trailer. After delivering your load you will deadhead to a shipper to pick up your next load.

Rainy D.'s Comment
member avatar

Ditto what Old School said. i didnt mean to come across nasty. i just meant there is so.much misinformation out there.you are very well meaning, and it comes across that way.

Figure this...I only trained new drivers for 3 mos last year and did $72k ish... plus i got a good bit of home time. if i took more students and stay out longer i would beat $80k with no problem. of course all that includes detention, OTD and fuel bonuses. It doesnt include my Prime rewards points which add up quickly.

Old School's Comment
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So where exactly are they making money besides that? The company pays a percentage?

Let me explain G-Town's response. As an owner operator you are responsible for the fuel. So, let's say you delivered a load down to Miami, Florida, and it paid pretty good too. You got your 70% of the load, and you're feeling good about life - cha-ching - it feels like you just put one over on "the man." Now you discover the few loads available to you from Miami don't pay enough to buy beans with! What do you do? (Freight rates vary considerably in the different parts of the country)

The planners at the company you're leased onto find a little better paying load out of the port at St. Agustine, Florida. You decide to accept that load, but now you've got to run your truck the 320 miles to St. Augustine on your own dime. You're getting maybe 8 miles per gallon while unladen, so you're going to pay for 40 gallons of fuel just to be able to get started on this load, plus you're driving 320 miles while nobody's bothering to pay you for it.

That's what G-Town means by "deadheading." Anytime you're moving that truck, you're the one responsible for the bills. Sometimes the company offers to pay something over a certain amount of miles, but I think you get the picture. It goes right back to what I was saying about eliminating those variables. Deadhead miles are a necessary expense in this business and will vary from month to month on each truck out here working. If the company can control that variable expense, or eliminate it altogether they will be increasing their profit per mile, because now they are only dealing with "loaded miles."

Now that euphoric feeling you had down there in Miami has turned to indigestion, and you're starting to wonder "What was I thinking when I decided this owner operator gig was such a brilliant idea. The money I'm losing on this load to get me out of Florida has taken away all those nice gains I thought I had made on my last load. Dang it, this business is frustrating! Wait a minute, what's that smell, and why am I seeing smoke or steam pouring out from the hood of my truck?"

Deadhead:

To drive with an empty trailer. After delivering your load you will deadhead to a shipper to pick up your next load.

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.
Brian's Comment
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That is alot of variables to consider. You have certainly learned alot about the subject Old School, thanks for taking the time to explain that. And G-Town.

Carla P.'s Comment
member avatar

So I've been with Swift for just over 2 months now. I did my training with someone that was leasing a truck, this person was in the red on her truck payments and her maintenance account, most of her personal Bill's were late, all because her truck broke down and she was off 2 weeks. Now I'm sure that didn't all come about because of just the 2 weeks, surely this person hadn't been managing their money right all along , this person hadn't even paid last yrs taxes. So my point is, if you are thinking of doing the lease purchase thing, make sure you are very good at managing your money! I also had the opportunity to meet other lease operators and they always kept a student on their truck and were doing just fine. But it took having the income from the miles that the student's were doing in order to make it. Is that something you would be willing to do or would want to do all the time? I personally am against leasing a truck! Why have the extra headaches and stress?

When my truck breaks down, I call my company they take care of it ! No stress there! :) I can take off and not worry about how I am going to make my truck payments! No stress! On average I am bringing home between 800 and a 1,000 a week. I can definitely live with that! And my taxes are paid!!!

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.

Grumpy Old Man's Comment
member avatar

I'm not sure how the Prime leasing program works, but as a normal business owner, you would be responsible for insurance (vehicle, health, life, disability, etc.), self employment tax (it's the half of social security an employer normally pays), maintenance, fuel, phone bills, hotels if the truck is in the shop, and all kinds of other expenses. If the Prime leasing program doesn't cover those types of things, then they come out of your pocket, and Prime is saving those costs. Then there is unemployment and worker's comp. In many states you can't cover yourself, and in some of the ones that you can, it is extremely expensive.

There are a ton of savings to an employer to have someone work as a 1099, or independent contractor. That's why you hear so much about the "gig" economy.

HOS:

Hours Of Service

HOS refers to the logbook hours of service regulations.
Brett Aquila's Comment
member avatar

Another thing to consider is that the company you're leasing from is handling all of the products and services you need while making a profit for themselves. They buy fuel in bulk and get a discount for it. You get a discount through them, but they're not going to pass you the full discount. They're going to make a little profit from that fuel.

The company is going to allow you to get work done at their shop, but you're paying for it. Again, they're going to turn a profit from it.

The company will book all of your freight for you. They're your broker. They're going to pay you a percentage of what the load pays and keep a profit for themselves.

Same with your insurance, tags, vehicle financing, and everything else. They're the service provider for everything you do. They turn a small profit from all of it, risk free. They make their money before you make yours, and you're the one covering all of the expenses like repairs, tolls, and fuel for deadhead miles.

Now you have to consider that the average profit margin in trucking, after paying the driver and all expenses, is about 3% - 4%. If the company is adding a few percentage points to every product and service you need to operate, how much additional profit do you think is left? If you were operating your own business without a middleman and everything went perfectly you could expect to average 3% - 4% more than a company driver would make. But since you have a middleman to pay, the potential for an additional 3% - 4% profit potential is gone.

That's why I cringe when I hear the lease operator's mantra - "I make a little more than a company driver does," because I don't know how that could be possible. Where is the extra money coming from? There's only the potential for 3% - 4% more than a company driver makes to begin with but then you're paying a middleman, who happens to have iron fisted control over your entire operations, to provide you with all of your products and services.

The math just doesn't add up. To be honest, I don't believe any of them when they say they're making more than a company driver does, and why should I?

  • Not one of them can prove that they're making more money than a company driver
  • Not one of them can explain to me where that extra money could possibly be coming from
  • Why would the company create these lease programs if it meant they were going to make less money than they do with their own company drivers?
  • If there's so much money to be made leasing a truck, why don't most of them do it for more than a few months? The ones that do it for years, why don't they lease a fleet of trucks and hire drivers if there's more money to be made that way?
It makes no sense on any level that they could possibly be making more than a company driver. That's why I did a podcast called Don't Be Fooled By Owner Operator Math.

Deadhead:

To drive with an empty trailer. After delivering your load you will deadhead to a shipper to pick up your next load.

Owner Operator:

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

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