By Donna Ryun, OOIDA communications manager
We’ve all seen the bait. It comes in the form of advertisements in local newspapers, trucking magazines, and numerous other places. “Own your own truck – No down payment – No credit checks.” It sounds like the answer to an aspiring owner-operator’s prayers, particularly for someone who doesn’t have money to spare for a big down payment and who perhaps has a few too many blemishes on the credit report.
But you know what they say: If you think it’s too good to be true, you’re probably right.
If you’re tempted to take the bait and fall prey to contracting with a motor carrier in a lease-purchase arrangement, you need to know what’s on the other side of the hype.
I think it’s safe to say that when motor carriers offer lease-purchase options, it’s not so that they can help you make your dreams of becoming an owner-operator come true. More likely, it’s because the motor carrier wants to update its fleet but doesn’t want to risk losing money on the trade-ins.
The lease-purchase option enables the carriers to find a solution to this problem through their own company drivers and others who aspire to become owner-operators. By offering a lease-purchase option, the motor carrier not only gets to increase its fleet without having to hire more drivers, but also gets the new “owner-operator” to assume most of the risk, including the lease payments as well as other costs such as maintenance, insurance, fuel and taxes.
So what does the new “owner-operator” get from the deal? Unfortunately, in many cases, he gets the shaft.
Although the trucker is making the payments with the belief that he is purchasing ownership in the truck, the truth is that in most cases they are only rental payments. The option to purchase the truck comes at the end of the lease, provided the driver makes it that far.
Most don’t, and the few drivers that do usually end up paying thousands more for the truck than it is actually worth.
You will find the specifics of the lease-purchase option in the contract, so read it thoroughly. Most have terms that call for reserve accounts. That means deductions from the driver’s earnings are put aside in a separate maintenance fund to pay for major repair expenses.
Keep in mind that often the driver pays expenses for smaller repairs from his or her own pocket or settlement check. Particularly on older trucks, small repairs can add up quickly, leaving little or nothing for the driver to take home to pay household expenses.
A driver has to be able to count on some good loads in order to make up for the numerous deductions that come out of his settlement check, but that doesn’t always happen. According to some of the complaints OOIDA has received, good loads may be plentiful early on in the contract. Then the most lucrative loads slow down considerably and often stop completely, depending on how far the trucker has progressed toward the remaining balance of the lease period.
If you’re starting to think that the motor carrier wants the owner-operator to fail, join the club. If finances get so bad for the trucker that he ultimately breaks the lease, the motor carrier not only may get to keep the escrow, but is very likely setting up another unsuspecting driver in the repossessed truck for yet another lease-purchase option.
It makes a person wonder whether some large carriers are making their money via the business of hauling freight or through the indentured servitude of drivers who aspire to become truck owners.
While some might say that those who choose to “buy a job” from a carrier in hopes of owning their own truck deserve what they get for signing a lease-purchase contract, it’s important to note that the driver is not the only victim.
As long as carriers can boost their profits with money made at the expense of aspiring “owner-operators,” they can afford to haul cheap freight, which forces freight rates lower, thus hampering the ability of all truckers to make a decent living.
If you still think that you can make it to the end of a lease-purchase option as a proud truck owner with your bank account intact, I urge you to do some research on your own.
Read all contracts carefully. If you don’t understand the terms, ask a professional to explain them. Call OOIDA to see whether any complaints have been documented against the company whose plan you are considering. Have your attorney and your accountant review the contract and answer all of your questions before you sign anything.
Consider the odds of success carefully because you owe it to yourself, your family and your fellow truckers to make the right decision. LL