Category Archives: Business Reference

Before you lease your truck

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After years of being a company truck driver, you are considering buying a truck and leasing it to a company. Before you lease your truck with any company, you should consider a lot of factors. This brief review is just that – a brief review. I will provide expanded details in other sections for most of this issues and why you may want them.

I strongly recommend that before you even talk to any company about being one of their haulers – you research the company. Research should more then anything else include talking to multiple Owner/Operators who are already signed on with the company. Regardless of what the recruiters tell you – people in the field will tell you the rest of the story. And it is also important to talk to multiple because you can guarantee that at a few are not going to be unhappy – and generally these people are always unhappy about everything. Want to spot a driver that will give you a balanced review, look for the guy or girl with a great looking truck: clean and well maintained.

Just like the day you decided to be a truck driver in the first place, there are 100s of little decisions that you will need to consider as a possible Owner/Operator. In no special order, lets review some of the things you should consider.

Type of freight

Most drivers will stay with what they have most experience with. Few drivers will want to jump from van to flat bed or bulk to reefer without a strong reason. And the reason should not be a recruiter or magazine ad that boasts of the amount money the driver can make.

Area of Operation

Hate big city driving – pay close attention to the operating areas of the company. If you hate Northeast traffic, be certain the company does not haul there. Lots of companies will have hiring areas in the midwest or central south – but that does not mean their traffic is mostly with in those areas.

Truck Liability Insurance

Insurance companies, as you know from your personal auto experience, are weird companies. You might have 10 years experience as a driver but being a new truck owner, you might find some companies will not provide you with your bob-tail or truck base liability insurance or will jack your premiums extra high.

Weekly Settlements

Every week you will be spending a lot on money on operating expenses. You will have (likely) daily fuel purchases, meals, showers, (maybe) parking and tolls. The longer it takes to get paid, the money you will have spent out of your pocket and the longer you family has no income.

Direct Deposit/Payment Settlements

It will do you no good to have $1,000s in checks sitting in the mailbox at home while you are on the road. Even if you have a spouse or family member receiving your checks and depositing them for you, the delay of the mail (2-3 days) then any delay (2-3) days for the person to make it to the bank to deposit, you have another week or so before you money is available.

Base Plates

Your truck will have to ‘base plated’ in the state where it is registered. Some companies offer base plate programs that allow you to base your truck in states with better (lower) registration fees.

Fuel Surcharge Payments

Most companies keep their freight rates flat, at least on an annual basis. However, fuel prices change constantly. As a result, shippers often pay a fuel surcharge as fuel prices increase. You want to make sure you get all the fuel surcharge since you are paying for the fuel.

Trailer Rental Fees

If you are required to provide the trailer, you may want to check to see if the company has a trailer program. It might (MIGHT) be cheaper if they provide trailers with plates and maintenance rather then you having to do it.

Freight/Cargo Insurance

Who pays for cargo or freight insurance is a big issue. Signing on and then finding out you have to pay this could put you out of business.

Bobtail Mileage Payments

It is important to know if the company will pay you bob-tail or trailer miles when you have to drop a trailer in one location and then drive substantial distances to get another trailer, you may want to be paid for it.

Toll Road Fees

More and more states are installing sections of toll roads and those with them are increasing fees. One trip thru Ohio, Pennsylvania, New Jersey and New York and you will understand why you will want the company to pay tolls.

Prepass

The time and fuel spent every year exiting the interstate to cross the scales and pull right back out add up. Using Prepass to motor on down the highway can save you 15-20 minutes effectively every time you pass the scales. That can add up to several driveable hours every week.

Detention/Layover Pay

Being forced to wait to load and unload will happen often. If you are where you are suppose to be when you are suppose to be there and the shipper/consignee is not ready, who pays for all waiting? Sitting for 6 hours because of no fault of yours is costing you money unless you paid Detent Time.

Qualcomm or Satellite Fees

Nearly every company now uses some form of satellite tracking system. You should know who pays for the equipment, the installation, any required maintenance and the monthly fees.

Summary

As I stated, this is just a listing of the things you should consider. Look for detailed information on each section to learn more about how different programs/services work and can affect you – the new Trucking Company Owner.

Happy Trucking, John

TripPak – Load Submission Program

Owner Operator Extras

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Companies that use a large number of Owner/Operators (O/O) may provide their contractors will programs and extras to assist them in being successful. Like a broken record, I have to repeat the statement, every company does thing differently and it is important to get in writing all matters and to make sure you understand them before signing your truck up to work with any company.

Qualcomm or Satellite Service

With so much freight being sent Delivery Just In Time or Time Sensitive, many shippers and consignees want instant access to the status and location of their shipments. The flagship of satellite tracking is Qualcomm. The cost of installation of the units and the monthly maintenance fees care an added expense for Owner/Operators. As a part of recruiting, companies may offer to pay for either the installation cost, which can easily be $500 or more depending on circumstances and also the monthly service fees. A consideration regarding the satellite equipment is that companies may charge you a deposit out of your settlement checks and when (if) you terminate your agreement with them, they will hold the deposit (which could be $1,000s of dollars) until you return the equipment in good condition. If the equipment is damaged, they may deduct money from your deposit or final settlement. If at all possible, it is recommended that you personally deliver your removed unit to prove no damage or have it removed by an authorized installer for the original company.

Fuel Purchase

Fuel is the largest single expense of operating a truck. Anything that you can do to lower this expense is critical. Some companies offer fuel purchase programs that allow drivers to fuel up at selected locations/sources for a discount. This may be done by enrolling the O/O with a fuel card such as Fleet-One, Fuelman, etc., or with a fuel network (Pacific Pride, CFN, etc). While individual trucks can enroll in these programs, a company that enrolls 100s of trucks may be able to achieve better rates and discounts. Companies that provide refrigerated services may also arrange for discounts on used for the trailer reefer fuel, which is not always included in discount programs.

Maintenance Programs

Tires and routine maintenance (Oil/Lube/PM) expenses are always on the truck owner’s mind. These little expenses add up over the course of a year. Larger companies will try to establish discount programs thru nationwide or regional maintenance companies such as Blue Beacon, Speedco or Wingfoot.

Benefits

The availability of benefits such as medical, dental, disability and life insurance at group rates can make them much more affordable. Even under Obamacare, group plans can be a much better bargain.

Truck Insurance

Your truck liability insurance is of course a substantial annual expense where you can benefit from 10% to 20% in group discounts. This could be more important if you are newer driver with less then 5 years of experience. Even if the company does not advertise this being available, check with the recruiter to see it is available. It is also important to know if you have to provide freight insurance or if the company is providing it. If you are required to provide it, does the company have a program that allows you to obtain it at group rates.

License Plates

Another one of those programs that may save the Owner/Operator money is when the company provides base plates. However, consider if the plate will be in another state then where you live so that you do not encounter both states charging you income taxes. Check with a tax professional before you plate your truck in a different state then then your residence.

Fuel Tax Filings

You will be required to file IFTA reports and pay appropriate fuel taxes regardless of where you plate your truck and where you run. Some truck owners are comfortable filing their own IFTA reports. while others would prefer not to do the actual paperwork. Some companies will prepare the filings for free. Some companies require that you use their services.

Trailer rentals

Sometimes Owner/Operators are required to provide their own trailer. Not all owners have already purchased a trailer. They may have been working for a company that provided trailers or they may be changing from vans to reefer or flatbed. To assist new lessees, companies may have contracts with trailer sales companies with lower initial payments or better interest rates on the lease. It is important to shop around if you will be needing to obtain new equipment. If you have a relationship with your local credit union or dealer where you purchased your truck, you may be able to get a better deal.

Loaner Truck

breakdown coverage
Truck breakdowns happen. When that happens you sidelined for a few hours to a few days to a few weeks on more serious events. The company you contract with may offer some form of Loaner Truck program allowing you to continue to work while yours is in the shop. Do not jump on this without checking with the company performing the maintenance about their programs. Some dealers either have trucks available for short term use or have arrangements with leasing companies. While a loaner truck program may be available, it will not be free and may not be a good deal. The primary purpose of offering loaner trucks is so that the freight will be moved – not your daily operating costs.

Settlement to bank account

Unless you have a spouse, friend or family member that can receive your mail and deposit your checks every week, you may want to make sure that what ever company you sign on with can deposit your payments direct to bank or a payment card. Smaller companies may not offer this as the banks like to charge excessive fees for such services. Unless the company is large enough to muscle the banks into better deals, they may not want to offer direct deposit services. Luckily, several non-bank financial services companies are starting to provide direct money transfer services.

Factoring of Load Payments

Cash flow can be important to all businesses – especially 1 or 2 truck owner operators. Depending on your lease arrangements you might have to wait 1 or 2 weeks for payment for delivered freight. A few sudden maintenance bills or even personal expenses might require you to get your money fast. Freight Factoring is a service where for a fee, a company will pay you sooner for your outstanding invoices. This service could also be very important if you are a new leaser and need to buy fuel. Be very careful when using freight factoring because it is not expensive and over the course of a year could become a large annual operating expense.

How Insurance Works

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Most people are confused about insurance. And rightfully so. Even many people in the insurance industry are confused about some of the forces behind one of the largest industries that produces nothing. Yes, when you think about it insurance produces no actual product or service. Banks at least provide money for businesses and people to conduct business.

Taxes collected by local, state and federal agencies fund services such as roads, police, schools. fire protection, etc. Insurance companies collect money at each step of your life. Medical. Auto. Home. Life. Business. Yet you get nothing back unless you have a claim and then the true objective of insurance it to make you whole – return you to the state you started – as opposed to advance you. If you are in a car wreck – the insurance fixes your care. They don’t just buy you a newer one. And they will only fix your car if it is wrecked. Not just because you need a new car because it is old and wore out.

At some point, we shopped around for insurance – found it confusing and it appeared to be about the same in price and service so we figured insurance is insurance is insurance. It does not matter what company we get it from, it is basically the same. You have reached the conclusion that insurance is insurance is insurance. That is far from the truth. So you finally settle on a company or an agent that you like or that sounds good to you.

Several things can change affecting your insurance and your coverage – and some of them you may not even realize. Insurance companies work on the premise of spreading the risk among lots of players. The basis is that a lot of people each put a little money in a pool or pot that is then available for the expenses of the few that need it for an emergency. (Well, that was the the original idea anyway.) What happens behind the scenes, is that as companies notice higher then expected claims in one category, they adjust up the amount they want people to pay for that coverage. The Premiums.

One part of calculating insurance premiums that you have no control over is the insurance companies business model. Companies make behind the scenes changes that can dramatically alter your coverage. Company managers, in an attempt to increase a certain class of coverage (i.e. investment property, commercial property, etc) may sudden drop their premiums. This, of course, brings in more business. You may be one of the them that changes companies to enjoy the low prices. Overtime, the company is bringing in insufficient cash flow to cover claims and expenses. The company suddenly realizes this and starts raising prices. Your premiums might go up 4-5-6% every year (or even 6 months) several times in a row.

There are basically two types of agents: Independent Agents that represent numerous companies while Exclusive agents work for only one company. Examples of Exclusive agents would be State Farm, Farmers, Allstate, etc. Independent Agents have the option to write coverage or policies with any company that they have an agreement with. Not all agents represent all the companies and each agent will have their favorite company.

Your insurance agent is not always your friend, even is they are your friend. Agents are paid a commission on premiums. Different policies or policies types will pay different amounts. Different companies also pay different percentages. Because agents are primarily paid on commissions – the higher the price, the more money they make. Not that all agents are dishonest or will always place they income wants over what is best for you – you still should always place close attention to the details.

There is nothing wrong with getting regular insurance checkups and doing some comparison shopping. And it does not hurt to shop other agents. Unless you are in the insurance business you will never be an expert. t is possible that even if you are associated with insurance, that you will only know and understand a small part of the industry. Being an informed shopper is the only way to get them maximum value for your insurance money.

And one final point – Price is not always the most important part of the decision. You need the right coverage for your situation.

Mid-America Trucking Show – March 27 – 29, 2014

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The Mid-America Trucking Show, at the Kentucky Exposition Center in Louisville, KY., is more than a trade show.

As the annual forum for the heavy-duty trucking industry, attendees will have the opportunities for face-to-face interaction between industry representatives and trucking professionals.

Exhibitors will obtain marketing that can effectively introduce new services or products, increase brand awareness, promote products and connect with suppliers, customers, and prospects. Those in the trucking industry can research products and services, meeting with representatives and interview potential vendors and contractors.

MATS is where the industry comes together, where attendees network with Fortune 500 companies, where media outlets from around the world go to report on the business of trucking, and where trucking business gets done.

Mid-America Trucking Show – schedule

Thursday, March 27 VIP Session: 10AM – 1PM | General Admission: 1PM – 6PM

Friday, March 28 General Admission: 10AM – 6PM

Saturday, March 29 General Admission: 9AM – 4PM

Mid-America Trucking Show – Location

Kentucky Exposition Center
937 Phillips Lane
Louisville, KY 40209

Parking will be available for autos, RVs, and even Semi-Trucks with trailers.

Seminars may include: (Schedule subject to change)

  • CMV Inspection 101
  • Sleep Apnea-No Rule Rule on Sleep Apnea
  • Accounting/Finance
  • Big Time Training on a Small Budget
  • Increasing Tire Life and Ride Control
  • Pre-Trip Inspection
  • FMCSA Hot Topics

More information at http://truckingshow.com/

So, You Want to Be an Owner/Operator? Not so fast.

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Richard Stephens
March 9, 2014

I have been following a soon-to-be Owner/Operator on Twitter for the past couple of months. They (a husband and wife team) have been tweeting all of the aspects of their progress, from getting licenses to buying their rig. It would seem that all of the paperwork required would scare most drivers into just driving for a company. When they finally found the right truck, you could just “hear” the excitement in their posts. The pictures they posted of that shiny new rig made you feel like doing a fist pump and shouting, “score!”

Their journey has certainly opened my eyes to all of the paperwork required before you can haul that first load. Yet with all of the hoops they had to jump through and hurdles to bound over, they were missing one critical piece in their quest in becoming a successful O/O: software.

“Software? I don’t need no stinking software to drive a truck!”

There is no doubt that we now live in the digital age. It’s all around you: smart phones, PCs, tablets, GPS devices, etc. You may certainly use a printed map to help navigate. You may certainly use a printed log book to keep track of hours. And, you may certainly use pencil and paper to track your mileage in each state (or province), the roads you traveled, where you got fuel, and any maintenance performed on your rig. However, with all due respect to the “graybeards” still out there driving, this isn’t 1975.

Software has become the accepted standard for replacing pad and paper. Besides needing software to track your driving hours, you need software to track your business. That’s right; as an Owner/Operator you are now a company. You have bills to pay, truck(s) to track, IFTA and DOT maintenance reports to file, loads to find, and money to collect from customers.

So, just how do you find the right software to help your new business? First, ask your fellow truckers. Yup – word of mouth is a great way to find out what works for someone else. Second, ask truck organizations you trust (such as OOIDA) what they recommend. Third, use your favorite search engine to look for software reviews. And finally, call the software company and ask to speak with the developer of the software.

“What?! Talk to the geek that writes the software? That’s unheard of!”

Hear me out. I hate talking to sales people, as they will simply tell you everything you want to hear. I find that if I am “allowed” to speak to the developer, that I can get specific answers to questions, rather than the politically correct, scripted answers. The developer knows what the program can, and more important, cannot do. If you cannot speak with the developer, then don’t buy the software.

The best software doesn’t necessarily have most expensive price.

That’s right. Regardless of what your country’s leadership reports about the economy, we are still in the middle of an economic “down” period. I have noticed that a lot of software companies have actually raised their prices to compensate for fewer sales. The software company that actually cares about YOU, the O/O, will reflect that in their pricing. So, look for a good “bang for your buck.”

Another key factor when looking for the right software is the “nickel and dime” aspect. Every software product has its initial licensing fee. That’s what I call, “the first shoe to drop.” The “second shoe” is, “What are the ongoing costs?” Here are five items that are important to know:

Are there any costs in upgrading to newer versions as they are released?
Are there any monthly costs just to use the software?
Are there any costs to get training for how to use the software?
Are there any costs to get technical support?
Are there any costs in getting help when you need to move the software to another PC?

I always expect to pay an up-front fee to use software. However, I detest monthly fees and fees to get any kind of support. You need to factor these items into consideration before buying the product. And if they won’t help you move the software in the future, then that should raise a huge red flag.

I recently spoke with a trucker who was using an older version of his trucking software when his hard drive crashed. Luckily, he had a backup of his data. When he called the software company to help him get going with his new hard drive, they would not help him because he was on an older version. WOW. Talk about the fastest way to lose a customer.

So, doing a little homework will get you going with the right software. Just don’t forget this critical piece when beginning your O/O journey.

Richard Stephens, owner of ALMSys, Inc., is the author of the “Rig Expense Tracker” trucking software. For more information on Richard and his software, visit his website

Why not to Lease Purchase

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Note: This information provided from off hand conversations and is not based on confirmed personal knowledge. Counter points and additional dialog from drivers and companies who are or have been used lease purchase options are encouraged. Please contact me.

Prolog: Whiles in truck driving school, I saw numerous advertisements for companies offering lease purchases. Once out of school, I looked at numerous companies’ websites looking for work. I had, at the time, been working for myself for years, and liked the pride of ownership idea. Thus, I strongly considered lease options. However, my finances at the time did not give me the option to consider it. And I wanted a couple years of experience first.

The Theory of Lease Option

One of the allures of truck driving is the independence from the office. While you might have a boss that is looking over your shoulder, it is only electronically. At least as once you have completed any trainee time, and assuming your are not running as part of a team, you will be alone. Very alone at times. If you are running an assigned truck, you get a certain amount of freedom to lay out your stuff in the cab your way. You can, to a point, install extras to make the sleeper area your little domain. If you have a different truck often, you have few options to make it your own.

Regardless, the truck still belongs to someone else. They may have restrictions on any modifications you can do to the truck including mounting of CB radios, TVs or other electronic devices. Another kink is that some companies may limit what you can have in the cab/sleeper. Because of the concerns about excessive electrical loading, some companies will restrict or even prohibit such items as microwaves and refrigerators.

Now, in the event that you own the truck, you have greater freedom to customize and accessorize the truck to you. And the additional of such things as a refrig, a microwave, a TV with satellite, etc., can greatly increase your quality of life while on the road. A lease option gives a driver with less then sufficient down payment and or a blemished credit history to enter into the truck ownership business. Leases, unlike rentals, do include the option for the lessee to purchase the truck at the end of a specific time frame.

Execution of the Lease

Many lease options available to new or newer drivers are in direct concert with the trucking company that will be handling the dispatching and providing the freight that will be used to service the lease payments. While most (larger) truck dealerships and numerous truck financing companies provide truck lease options, they are generally only going to work with drivers with more experience and or stronger credit backgrounds. This relegates many drivers to doing a lease option directly with a trucking company.

This may or may not be advantageous. Well, it will always be advantageous to the company, it is really only a question of if it will be good for the driver/owner.

Here is the problem. If the company already owns the truck, by leasing the truck to the driver, the company basically transfer the obligations for the truck to someone else. The company still controls when and where the truck runs, which loads the truck gets and how many miles the truck works The company in essence still owns the truck, but the payment is coming out of of the driver’s pocket. In the event of slow times, the company can keep it’s own trucks busy or at least busier and let the lease trucks sit idle. After all, the driver is on the hook for the lease payment regardless of if he is working or not.

And since the lessee/driver is responsible for maintenance, the risk of a large repair bill is no longer a concern of the company. When a company has 100s of truck under dispatch, that becomes a large maintenance reserve. Split half those trucks off to leases, and clearly there is less tire replacements, less major and minor maintenance reserves.

Lease Defaults

Some less then honest (with their drivers) companies, are known to release trucks and trailers after a previous driver has defaulted. This can be easily achieved. During the initial lease years, the company dispatches the driver with plenty of miles. After a time frame, the miles start getting less and less. Eventually, the driver is getting so few miles that they can not afford to maintain their truck payments and have any money left over to take home. After a while, the driver throws in the towel and goes looking for a job with another company. The truck then returns to the original company under the lease, who then can lease it to another driver.

If the company does this a couple of times, it can basically make a profit off of the truck in additional to the money earned from the use of the truck to handle revenue freight. Some companies also add numerous small deductions, with holdings and reserves from the settlement checks that it reduces the net pay far below the advertised per mile or percentages, by as much as 20% or more.

Now, I am in now way saying every company does this or even which companies might be doing this. It is important for the driver that is considering entering into a direct lease purchase with a trucking company to carefully review the contract. Knowing if the truck has been previously leased or not could be a major key to motivations of the trucking company. A lawyer and or accountant should also review your lease before you sign it. And be alert to the end of lease purchase price – it may be so large as to not really be worth it.

Pride of ownership is a great reason to be a lease operator, however, fancy advertising and catchy slogans should not.

Happy Trucking, John

Trip Permits

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Trip Permits

Trip Permits are (generally) short term special use authorizations for a truck to operate with a state it does not normally operate within or hauling an unusually large or heavy load, even in the base state the truck is licensed in.

Many trucking companies do not pay the registration fees for all their trucks to be operated in all states. They many only establish authority to operate their trucks in a hand-full of states where they do most of their business. However, occasionally they need to send one or more rigs to other states to deliver or pickup cargo. TO legally enter a state and travel it’s highways, it is necessary for the company to obtain a Trip Permit. This can be done several ways. The company can contact the state directly and complete the process or the company can use a 3rd party commercial truck permit service. [If you google.com or bing.com Trip Permits, you will get dozens of companies that provide these services.]

The states, for the most part of made the process easy because it is all about revenue collection. To get the permit, you pay money. Now there are exceptions to the easy to do policy. Some states are much friendlier to work with then others. Names will not be named. That is one reason many companies will just turn to a commercial permitting company. Since these companies do this all day long and many have agents on duty 24/7, the extra cost of using them is offset by their ability to navigate the processes for each state and get it right the first time. A permit with errors could result in major fines and problems, including the truck and cargo being seized, until the issues are resolved.

Another common Trip Permit situation involves the moving of large or heavy loads. Loads exceeding 80,000 lbs generally must have special use permits. Key exceptions are that in some states, such as Michigan, truck/trailer combinations may have extra axles and thus authorized proportionately large loads. However, these trucks are restricted to in-state only and also pay substantially higher registration fees in the first place. Regardless of obtaining a trip permit, a truck is not allowed to haul heavier loads without more axles/wheels so it is not a simple matter to get an over weight permit and then put more on your standard 5 axle/18 wheeler.

Special Use Trip Permits may be required for wide and/or tall loads. As a part of the permitting process, the state(s) will identify the routes the load is authorized to take, the hours when the load can be moved (generally not at night) and special equipment/banners/markers that must be attached to the load. Additionally, the trucking company may be required to hire ‘Escorts’ to either precede the load, follow the load or both. Extra ordinarily large loads may have a police escort leading the procession, two private escort cars in front of the load and one of them with a height pole to check for anything not high enough to allow the load to pass under, and then a following escort car to warn drivers coming up from the rear an attempting to pass the load. All these requirements will be noted and specified in the trip permit or authorizations.

In the modern day of computers and online services and the use of the IFTA and IRP, trip permits are not as big an issue as they use to, however, a career truck driver will likely encounter a situation where they will need to deal with them.

International Fuel Tax Association (IFTA)

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International Fuel Tax Association (IFTA)

The International Fuel Tax Association, Inc., is commonly simply referred to as the IFTA, and was formed to manage and administer the International Fuel Tax Agreement. The ‘lower’ 48 or contiguous US States and the 10 Canadian Providences are members and use the IFTA as a means to efficiently collect fuel taxes from motor carriers (trucking and bus companies) that use the highways in their jurisdictions.

The IFTA Mission Statement is: “To foster trust and cooperation among the jurisdictions through efficient and effective planning and coordination and oversight of activities necessary to administer the International Fuel Tax Agreement for the betterment of the members and our partners.”

While the IFTA is based in Arizona, the primary dealings are with the appropriate (revenue collecting) agency in the state where the trucking company is based.

To understand the purpose of the IFTA, you need to understand that each state assesses fuel taxes on fuel (both gasoline and diesel) which is primarily used for road construction and maintenance. There may also be state and local sales taxes figured into the price at the pump. Since each state will have different tax rates – both the sales tax portion and the road fund portion – prices at the pump between two truck stops, one on each side of a stateline between two states may have different prices. Even if the prices are the same, an issue is that if a truck driver fills up 200 gallons in state A, and then drives thru state B, to state C and then finally into state D, they have used the roads in 4 states but paid all the taxes to just one.

Before the establishment of the International Fuel Tax Association, each state collected its own fuel taxes and not all states used the same procedures. States generally established “Ports of Entry” that would issue permits and assure the tax collection. If a trucking company knew it would often be traveling thru multiple states, they might file permits for those states in advance. However, it was still a burdensome process on both the states and especially the trucking companies. A company with only a few trucks might be able to manage the paperwork, but as the company grew to more trucks servicing clients in more states, the paperwork and support requirements were business prohibitive.

Pre-IFTA trucks in inter-state commerce carried a special plate (“Bingo Plates”) upon which each state’s permit sticker was affixed. This system was inefficient and costly for each state to manage.

Post-IFTA, the driver’s purchases fuel as needed or based on company policy. The driver also maintains a daily trip log that keeps track of the mileage in each State (or Providences) by noting the mileage at each state line. The driver will also note miles on toll roads as some toll roads may have  a different fuel tax assessment. At the end of each quarter, the company uses purchased fuel information and uses a average fuel mileage (MPG) to calculate the taxes owed to each jurisdiction – regardless of where the fuel was actually purchased. The company then files a single report with their home state. The states, via working with the IFTA, then transfer the balances between themselves as a form of equalization.

It should be noted that it is possible to be owed a refund or owe additional taxes. This can occur if, for example, all fuel is purchased in a state with a low tax and yet a lot of miles are driven in one or more states with higher tax rates. However, if the Fuel is purchased in high tax states but a lot of miles are driven in lower tax rate states, a refund may be owed. The solution to this is to attempt to buy appropriate amounts of fuel in each state (at least with in reason if not to the exact amounts) so that you are paying applicable tax rates. Many new drivers (or even some older ones) that go to work for large trucking companies are often confused by the company’s use of a fuel purchase manager, since often they are told to stop and get limited amounts of fuel at multiple locations rather then one large purchase at a single truck stop. This is because the system is attempting to distribute the purchases across the numerous locations to prevent under or over paying the fuel taxes each quarter.

Three states [Kentucky, New Mexico, and New York] have a “weight-mile” tax in addition to the standard fuel tax. Oregon uses a weight-mile tax calculation.

The IFTA addresses the issue of payment of fuel taxes to the appropriate jurisdictions while the International Registration Plan or IRP address issues related to the vehicle registration and thus permission to even be operated on the highways of each state.

There are a lot of theories on how to reduce your IFTA bill, but none of them legally. If you drive miles in a state you are expected to report that mileage and you will owe that amount. The only way to owe less is to report fewer miles, but in the event you are caught cheating, the fines and penalties will eat up a lot more then the savings.

For owner-operators [O/Os] one area that could cost them money is if the leasing company uses a fleet average to figure average MPG as opposed to a truck average. Some truckers drive more efficiently then others and many O/Os like to driver newer, more efficient trucks. The result could be that the O/Os are assessed a lower MPG meaning they could pay more IFTA while the less efficient trucks/drivers benefit from the owner/operators higher averages.

International Registration Plan (IRP)

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International Registration Plan

The International Registration Plan (IRP) is a cooperative reciprocity registration agreement between the 48 contiguous United States and the Canadian Provinces. Unlike automobiles, each state in which a commercial truck [or trailer] is operated, the states want the truck registered with them which included paying appropriate taxes and receiving a license plate. However, that could require a truck to display 50 or more license plates depending on where the company operates. And this would be for every truck power unit and trailer in their fleet.

Enter the International Registration Plan.  IRP’s fundamental principle is to promote and encourage the fullest possible use of the highway system. This is accomplished by encouraging and enabling trucking companies to efficiently and easily handle freight in multiple states, thus providing economic activities.

Rather then the motor carrier contacting each state registering their trucks, individually, where they operate, a base ‘Apportioned’ tag is obtained from the company’s home state. The company then uses the IRP to selectively register the truck in all states/territories where it will be operated. The IRP then apportions the truck’s registration fees to each of the accepted states. You can check the IRP’s website for specifics on the mechanics of this. Now rather then a boat load of paperwork and license plates, the truck has one plate and the driver carries a card with the states of authorization to operate in the cab. In the event of traffic stop by a police officer, the driver hands, among other things, the base plate registration and the IRP ID card. This allows the officer to know the truck is authorized to operate in that state.

As the more states a truck is authorized to operate in the costs go up, some companies will only ‘register’ the truck in a few states – those states the truck is likely to operate in. If a company only operates in the Pacific Time Zone States, it would not be prudent or cost effective or paperwork logical to also authorize 50 trucks with trailers to operate along the Eastern Seaboard.

The draw back for not registering every truck and/or trailer in every state is if the company is offered an opportunity to haul a load to one of the unauthorized states. The company can turn down the work, which may mean it would not be offered such loads in the future. Or the company can accept the load, but the truck could be ticketed and seized if caught driving without proper permits for every state along the route. This is another advantage of the International Registration Plan. The ability to obtain temporarily permits for those states to legally operate.

It must be noted that there are two types of permits that will need to be obtained, if necessary. The registration via the International Registration Plan, and the fuel tax permits via International Fuel Tax Association (IFTA).

A company can file and maintain their own permits, but like everything, there are costs both direct (membership fees) and indirect (manpower, training) to handle permits. This can be especially expensive in smaller companies. There are numerous companies that provide permit services. These companies can generally handle both IRP and IFTA permits as needed. However, temporary permits are much more expensive if used extensively over full year permits. A company would be much wiser to obtain all permits that they may need for the entire year. Another problem with temporary permits is that there can be delays in obtaining them for those last minute loads, risking missing deadlines.

This is only a brief overview of the IRP system and is designed to alert the truck driver to the fact that the International Registration Plan is something they need to be aware of with regards to their truck’s paperwork.

Why use a lease for a commercial truck?

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Pros and Cons of a lease for a Commercial Truck

Ok, you have been driving a commercial truck for a couple of years and you like being a professional truck driver. But maybe you want a little more authority on operating the truck. Maybe you are tired of sharing the truck with other drivers in a slip-seat arrangement. Maybe you just want to drive newer equipment then the company is assigning you. Maybe it is a pride of ownership issue or you think that you can make more money then just being a driver.

Being an Owner/Operator is not for everyone but for many it is the way to go. Regardless of your reasons, you now have to decide: Lease or Purchase (with a loan).

With a lease – as compared to a loan to purchase, you generally have a lower (or even no) down payment, your payments will be lower; the leasing company normally assumes a portion of the maintenance and repairs (unless caused by your actions or in actions); you have greater flexibility to upgrade to newer, nicer, different equipment; and at the end of the lease, you can walk away with no additional requirements.

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However, with a lease, the equipment is still owned by the leasing company and you are accountable to them for insuring that the truck is maintained (both preventative and demand); you can not make modifications or changes and you might have a limit on where you can take the truck (only certain states, no Canada, etc.). Many leases include the option to purchase the equipment at the end of the lease period – typically 3 to 5 years, but could be any time frame – however, the total cost of the purchase of unit may be total greater then if you just obtained a loan.

Advantage of a lease for a commercial truck

One hidden advantage of leasing is that you get to drive the unit before you are stuck with it. Sort of like renting cars to get a feel for how much you like a specific model before going to a dealer to purchase one.

You may be required to obtain and pay for special insurance under your lease agreement. The company that you are going to haul freight for might provide insurance, however your lease might require that the insurance on the unit is in your name. This could cost you extra money. It is important to carefully review all fine print to understand your obligations.

Another issue is that when you purchase the truck, you are making an investment in equipment and that equipment is now an asset. When you lease, the lease is an obligation, which is could be a negative affect on your overall financial balance sheet.

Like all decisions you will have to make in your truck driving career, you have to carefully balance the pluses and minuses of each situation. There are long term and short term advantages and disadvantages to leasing and to purchase loans. Don’t let the complexities of leases or purchases keep you out of the game. There are as many advantages as disadvantages to being an owner/operator.

Many dealers have the the option for you to finance your tractor and trailer right on location. This may allow you to pick out your truck and drive it home the that day. However, you do not have to get financing from the dealer, in fact you may not want to do it as you may end up paying a higher price in the long run. The dealer’s leasing company may give you the best deal they have – but it may not be the best deal for you. If you already have an established banking relationship with a local bank or credit union, discuss your plans with a loan officer and see what they can offer you. Your relationship with them might get you a much better deal in the long run.

Shop carefully when you shop for a lease for a commercial truck.