Going independent or leasing to a carrier?
For Harry Zane, the decision to lease his truck when he became an owner-operator came after considerable thought and research. He knows he wants to operate under his own authority, but he’s not ready yet. “I would like to be a completely independent owner-operator,” Zane says. “I’ve talked to other owner-operators out there about the pros and cons, but I don’t feel like I know enough to on my own.”
Zane left the Army in 2008 after a 25-year career and completed his paperwork to become an owner-operator. He signed a three-year lease on a 2005 Freightliner Columbia through ATBS Leasco, leased on to Greatwide and drives routes in the U.S. and Canada for Am-Can. “I did the lease-purchase program to understand more about how freight works and to get my feet wet,” Zane says.
Zane and other owner-operators face the choice of starting their own business and running on their own or hiring out to a carrier. Each path has pluses and minuses, and Rick McNeill of Motor Carrier Consultants says not all owner-operators are suited to be independent.
“A lot of it depends on the individual,” McNeill says. “I’ve noticed over the years there are people who are more comfortable working for someone else who makes the decisions. And there are people who have the mentality they want to be on their own and have their own business.”
Carol Pense, vice president at The Permit Connection, says the pace of truckers seeking information or going after their own authority was higher the first half of 2009 compared with the second half of 2008. “I don’t know if it’s from people who’ve lost their job or are trying this as a new avenue,” she says.
Owning your authority
Running under your own authority, otherwise known as your motor carrier authority number, or MC Number, requires business sense, the willingness to chart your own course and experience behind the wheel. Plus, the patience and funding to set yourself up.
To run independent, you will need the required licenses, permits and tax documents and will have to keep track of them. You can hire a company to help you take care of the paperwork or enlist the aid of a business-oriented spouse. It will cost you $2,000 to $3,000 to get started.
Running on your own, you’ll be able to earn more, but it requires you to market yourself, find business and develop relationships with potential shippers. You can negotiate better rates with shippers than what you could earn by leasing with a carrier. Many independent owner-operators find some of their business through freight brokers, who charge a percentage of the pay for their services.
“I can tell by somebody’s organizational skills if they’re going to make it,” McNeill says. “If you’re marginally organized and have street savvy, you can make a living with your own company. There is freight out there — goods are being moved no matter what’s happening in the economy.”
Leasing it on
Experience is an important consideration for how much independence you want as an owner-operator. You may be eager to jump into running your own business, but a couple of years on the road may change your perspective or confirm your resolve. Those years of driving experience also will help reduce your insurance rates if you do plan to go independent, McNeill says.
When you drive for someone else and the miles are steady, you’ll make a living, pay your mortgage or rent and make your car payment. By leasing out, you’re assured of trips as long as the carrier stays in business and you accept the loads that are offered. You may feel less stressed knowing someone else is dealing with details like your base plates and freight, allowing you to concentrate on driving.
On the downside, you likely will hit a plateau in how much you can earn. “Leased guys pay a good percentage of their load to somebody to handle their paperwork,” McNeill says.
For now Zane is satisfied with his driving situation. He’s averaging 12,000 miles a month at 88 cents a mile, plus a fuel surcharge. “I’m on track to make $68,000 to $72,000 this year gross,” he says.
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