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The wheels of misfortune

Life, liberty and the pursuit of happiness" are the foundations upon which our nation is built. For many Americans, the pursuit of happiness is being in business for yourself - being your own boss. The life of an independent owner-operator in America is synonymous with the American dream.

But there is a growing group of truckdrivers learning tough lessons about the dream and how quickly it is lost. They're also learning about the great personal costs involved (both financially and emotionally).

Up until a couple of years ago, I thought that there were only two classifications of individuals who drive trucks -  those employed by someone and those who are self-employed. The distinction between the two is simple. The first is an employee who drives an employer's truck and the other is an owner-operator who owns his/her own rig.

Believe it or not, there are a growing number of truckdrivers who don't fit into these two categories. This third category is a little bit harder to define, but I think it goes like this: You are told that you are an owner-operator, but you don't own a truck. You are a rung above a company driver, but you usually make less money. Your paycheck stub, (oops, I mean settlement statement) not only has deductions, but has large sums of money flowing into reserve accounts as well.

"If you haven't already guessed, I am speaking of the dreaded lease purchase programs offered by many motor carriers today. This is the practice of carriers putting drivers in company-owned trucks and calling them owner-operators. "Rent-a-rides," as I fondly refer to this concept, seem to be nothing more than a driver retention program.

I'm not sure what has spawned this practice, but I suspect that it's a result of a couple of things - driver shortage and the carriers need to bolster their bottom line. Now the carrier can increase the number of power units they run without having to hire drivers. Why pay a driver wages and benefits when you can reclassify your driver as an owner-operator and not pay them anything until he or she pays for your equipment (and anything else that the carrier sees fit)?

"The victim (oops, I mean newly classified owner-operator) will enter into an equipment lease agreement with the carrier. Lease or rental payments are made to the carrier via deductions at time of settlement. These lease agreements are usually restrictive and quite costly. The lease payments, in many cases, exceed the average finance or lease payment through a traditional lender.

"The lease value of the equipment is usually higher than what the carrier paid, so your payments are higher. The rate of interest or lease charges are also usually high. In some cases, the actual payment can be twice what a normal payment would be. And the hefty amounts that are put into reserve accounts can be tough to recover.

"Now that you're an owner-operator, this costly lease probably affords you loads of freedom, right? Wrong! You normally have to purchase insurance through your carrier to cover your truck. (Oops, I mean their truck.) What if you get fed up and want to find a new home? Try taking their truck and leasing it on to another carrier. No problem. You just buy the lease out - if you can afford it. The payoff in many cases far exceeds the value of the equipment. Not to mention many carriers charge exorbitant administrative fees, which, ironically, can wipe out reserve accounts.

Now get this: You are not even building credit! Most traditional lenders don't view this as legitimate truck credit. This type of arrangement doesn't give a lender a historical record of an applicant's ability to manage a payment and their business. Heck, the carrier is doing everything! What freedoms do these truckers have that a company driver doesn't already enjoy?

"How does this happen and why are people sucked into it? The American dream is to blame. Given the choice of being a company driver or owner-operator, most would choose the latter. Why be a driver when you can be an owner-operator? That's a pretty powerful sales pitch made by many recruiters. They are selling it, and truckers are standing in line to buy it.

Carriers have turned independent truckers into dependent truckers. I thought a carrier arranged the loads and the owner-operator hauled it with their own equipment. Now the carrier provides everything for a fee, including the equipment. Maybe it's just me, but it seems that all an individual has to do under the carriers program is just drive. So there you have it. You're a driver, and not a small business trucker.

I think someone has taken this "one-stop shopping" concept a little too far, don't you?

March/April
Digital Edition