Refinancing A Leased Company Truck- When, Where, How?

Topic 30501 | Page 1

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Whatagal's Comment
member avatar

I am about to enter into my first lease purchase agreement under a carrier. It's one if those 'zero down/walk-away' leases. I know these are stacked heavily in the carriers favor but this is right for me right now. I have many years of driving experience but none as an O/O. I view this as not only 'on-the-job training' with a significant safety net, but also a way to 'get my feet wet' & find out if being an O/O is something I want to do or if I'm going to need to choose a different path.

That being said, I really have no intention, at this time, of doing it long enough to pay off the lease, although if my net is good enough,... I'm not ruling anything out.

My bank told me that they want me to have leased for 2 years. At my age, I am determined to move a little faster than what any disinterested party, to whom I am just a number, set the timeline of my life. So I am here to ask for other possible venues. I have thought of credit unions, but I have never dealt with any of them. I also thought of maybe getting a loan for minorities through the Small Business Administration.

I'll probably be choosing a brand new Kenworth so age and mileage should not be a problem. I think that with the zero down I will be 'equity challenged'.

Opinions & ideas, please.

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.

HOS:

Hours Of Service

HOS refers to the logbook hours of service regulations.

OOS:

When a violation by either a driver or company is confirmed, an out-of-service order removes either the driver or the vehicle from the roadway until the violation is corrected.

Old School's Comment
member avatar

Hello Whatagal, and welcome to our forum!

I will be up front with you. I am not a fan of being an Owner Operator. I have never understood the motivation for it. So let's start there. What is your motivation?

You called the bank a "disinterested party." I had to chuckle at that. I know a lot of bankers, and each of them is very interested in their clients being successful. Banks like to make money. They also have experienced a lot of O/Os going belly up on them. Trucking is a tough business. The bank is very much interested in seeing you succeed. They also don't think you can. That's why they advised you the way they did. Here's the straight scoop. They don't want to loan you the money because they don't believe you will be able to pay them back.

That in itself should give you pause. If you are like most folks wanting to become an O/O, you are thinking you can make more money. If that is so, why would the bank be leery of loaning you the money? Of all people, they know how to analyze a great business opportunity.

You are correct that leases are stacked in favor of the company. They lease trucks because that is a way for them to make more money. They also contract with O/Os because they make money that way too. They do both of those practices because it helps them put controls on their expenses. It is a solid business principle that helps them control their numbers.

I think you have got to ask yourself some hard questions.

  • Why am I dissatisfied being a company driver?
  • What are the benefits of me being an O/O?
  • Will I enjoy all the extra work and headache of dealing with all the expenses of operating a truck?
  • Am I being realistic in my expectations?
  • Is there anything I can do to improve my current situation?

That final question is one that I ask myself all the time. As a company driver, I have doubled my income in eight years. I earned fifty thousand dollars eight years ago during my rookie year. I have accomplished this by learning to be more efficient and developing a strong relationship with my dispatcher. We work together so that each of us makes more money. Are you aware that you can help your dispatcher earn more money? When you do, they will count on you tremendously. You will become one of their favored drivers who gets the best loads and the best treatment. I have drivers on my fleet making the same CPM rate as me who earn half as much as me. I always think there is room for improvement as a company driver. I have never met an owner operator who truly was doing very well at this. We have a few members here who are owner operators. I have a lot of respect for them, but I do not see them making more money than really good company drivers. If they are I would love to hear about it. So far nobody has been able to give me any solid evidence of it.

You asked for...

Opinions & ideas, please.

There's mine.

Let me just clarify. You can become an owner operator if you like, but I just don't think it is a path to a higher income. Freight rates fluctuate wildly, and there are occasional times where it will seem like you are really making bank, but business has this way of always returning to mean averages. That is something that is hard to get past. The large carriers have a great deal of influence in the markets. They have capacity. They have flexibility. They have capital and economies of scale that help to put pressure on rates. They can work at ridiculously low rates and still make money. There is just no way to get around those realities.

I am fascinated with this industry. I find working in it to be very rewarding. I know you do to, I can tell by the way you express yourself. I wish you every success, I just want to encourage you to find better ways to be more productive as a company driver. Take a look at this article and see if it doesn't motivate you to attempt to improve your performance and your income as a company driver before taking that risky leap into truck ownership.

Show Me The Money!

Owner Operator:

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

Dispatcher:

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.

HOS:

Hours Of Service

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

Just put all the money into a bag, light it on fire, then walk away. Anybody that's been a driver for a few years should know any lease is a waste. Then again, I've never had disposable cash just laying around.

good-luck.gif

Sid V.'s Comment
member avatar

If it's a zero down lease, why do you need a loan?

Old School's Comment
member avatar

Sid, it's my understanding that she went to the bank wanting to purchase a truck. They said no, and advised her to lease for a few years so she could get accustomed to the practice of being an owner/operator. Knowing bankers, that is a great way to say, "No we can't do that, but if you can show us you actually know what you are doing without us having to take all the risks, we might reconsider it." That makes a little sense to me because being a company driver doesn't really teach a person how to be an astute owner/operator. There are differences in the way we run and differences in the type loads we want to take. By leasing she might learn how to focus on those critical differences and show that she understands how to manage a trucking business so that it makes a profit.

I consider myself really good at being a productive competent company driver, but that does not mean I would be a profitable owner/operator. I know you understand these things. I am really just mentioning them to show others reading this how there is a totally different mindset to being an owner than there is to being a company driver. I think the bank would like to see her demonstrate some of that so they would feel more comfortable with extending the loan.

HOS:

Hours Of Service

HOS refers to the logbook hours of service regulations.

OWI:

Operating While Intoxicated

Old School's Comment
member avatar

I also think she is asking us how to purchase the truck she is leasing. It sounds as if she doesn't want to go through the whole lease. She wants to fast-track herself into being an owner/operator. I could be misunderstanding her, but that is the way it seems to me. She got rejected for a loan, so she is going into a lease hoping she can "refinance" it somehow to speed up the process whereby she is considered the owner of the truck. The problem with that is the company is using that asset (the truck) to make money. They will not sell it at a competitive price when they can lease it out at profitable rates.

I think there are some lessons to be learned here, but I don't want to derail this conversation with them at this point. I am hoping we will hear back from Whatagal with some clarification on her plans. Hopefully she can help us understand her motivation and her strategy. I know there are some of you who can give her some solid advice.

PJ's Comment
member avatar

I’m confussed. I’ve read the post 3 times and still confussed. Not that hard too do though!!

These zero down/walk away leases are just that. Most companies that do it that way lease used trucks. The company usually runs tgem 12-18 months, then lease them. As soon as you sign the contract they will start taking money for an escrow account. These vary widely. That is money they hold until you return the truck, then anything they feel it needs they repair and most often you never get a dime back.

You will also be paying for all the maintance. The company will tell you when and where to get repairs and pm’s done. Usually their shop.

It can be a way for someone to make a run at the business side, but all too often it doesn’t turn out well. Most finance compaines are interested in your experience overall in the industry and then look at your 3-5 yr detailed plan to make the business work and worth their investment. There have been many people buy their first truck that way.

There are tons of variables so if you have specific questions we can help more. Generic doesn’t cut it on this topic.

I can tell you if you have no money on hand and start out with nothing in the bank you are more likely than not to fail.

I have 2 older trucks running hard full time along with 3 qualified drivers, and sometimes the headaches just aren’t worth it. As I’m writing this I’m going into the website I use to pay the 2290 on both trucks. That’s 1100 cash.

Buying a new truck, hmmmm. They break down too. Yes they come with a warranty. First off it has to go to a dealer, many are backed up for weeks. Espically on warranty work. They make very little on those and hate doing them. The warranty will cover the repair, not the lost revenue. Do you have a plan for renting a truck in that event???

I could keep addressing various aspects but would only be in general. Again specifics including type of freight and where you will get it is much needed for any useful information.

Ask away!!!

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.

HOS:

Hours Of Service

HOS refers to the logbook hours of service regulations.
Scratch2win's Comment
member avatar

Call truck dealership's in your area and ask to talk to there finance person. Ask them what banks they work with. Then call those banks and get educated on what those loans are are looking for to qualify. Or just skip that entire process and buy a used truck cash because without already owning trucks and satisfied loans that's about what it's most likely going to take for them to even make it to the underwriters desk. With enough cash down there will be a bank that will pick up the loan that's for sure. Cash is king when talking finance.

HOS:

Hours Of Service

HOS refers to the logbook hours of service regulations.
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