Category Archives: Finance

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.

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

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.