Your Own Wagon?
Not everyone should buy a trailer, but it can be a solid financial move
When asked why he robbed banks, Willie Sutton answered it’s where the money is. For an owner-operator, the trailer is where the revenue is produced.
For independents and leased owner-operators alike, whether you own your trailer is a crucial decision in running your business. Factors such as what you plan to haul, where you intend to run, your experience and your financial situation should be considered. Know the type of hauling you want to pursue and which carriers or shippers might want to lease you on.
A trailer is a financial asset that can impact your profitability. In the 2009 Overdrive Owner-Operator Behavior Report, 67.4 percent of owner-operators who owned their tractor also owned a trailer. Among independents, 93 percent owned a trailer compared with 48.4 percent of leased owner-operators. Independents can solicit freight directly from shippers, while leased operators work with for-hire carriers that typically provide trailers.
Trucking financial services firm ATBS recommends taking a hard look at finances to see if trailer ownership makes sense. Create budgets with and without a trailer to see if you can afford it, says Richard DeForest, fleet sales vice president at ATBS.
Aside from finances, ATBS generally discourages its clients from buying a trailer for several reasons. One disadvantage is the loss of flexibility when dealing with a carrier that runs drop-and-hook operations, DeForest says. “Some carriers will have a trailer to tractor ratio of as much as 4:1 for their fleet to get the most flexibility and productivity possible,” he says.
Another disadvantage is if the tractor or trailer breaks down, the cargo has to be moved to another trailer, which entails breaking the security seal and bearing potential expenses of labor, forklift and dock rent. DeForest says a similar situation could result if an overweight rig is caught at a weigh station.
A third drawback in owning a trailer is time and money for maintenance. A trailer requires less maintenance than a tractor, but if an operator “has trouble keeping up with tractor maintenance, he probably doesn’t want to add more work and time for a trailer,” DeForest says.
You may also face parking and storage issues for a trailer when you’re at home that you might not have with a tractor.
If you want to be independent and run your own business, though, owning a trailer may enhance your profitability. By providing your own trailer, an independent can earn an additional 5-10 percent or 10-15 cents a mile on a load.
You can choose a trailer that maximizes your hauling potential. An owner-operators “ought to think about buying a trailer that will make him money,” says Craig Bennett, senior vice-president of sales and marketing at Utility Trailer Manufacturing. “Oftentimes when an owner-operator pulls a company trailer, he’s pulling a trailer that the company perceives to be the lowest-cost, best ROI [return on investment] product. They may not take advantage of all the fuel saving, lightweight features that might be available.”
By savvy spec’ing, you can get a trailer that fits your business model and your customers’ needs. Spec’ing materials such as aluminum versus steel or single-wide tires versus duals, you can reduce weight and increase payload, Bennett says.
Maintenance will take time and money to replace items such as tires, air bags and brakes, but it will pay off in longevity. “A trailer that is maintained can last 15 years or more,” says Hank Prochazka, vice-president sales and marketing at Fontaine Trailer. Chris Harrington, business consultant at ATBS, estimates budgeting 2 cents a mile in maintenance for a trailer.
An important part of spec’ing and maintenance, Bennett says, is to know what type of loading devices, such as forklifts, typically will be used in loading your trailer. He advises to watch, at least once cargo being loaded, the devices used and what type of pallets are included.
The bottom line is making sure you’re ready to take on the cost and responsibility of owning a trailer. “Buying a trailer is probably a better idea for a more experienced owner-operator,” Harrington says.
Jerry Jones owns three trailers and has owned as many as 10 in the past. He’s always pulled his own reefers. In 40 years as an owner-operator, Mike Davis has owned eight different flatbed trailers.
Jones and Davis say they own their trailers for the same reason — profit. “More money and more control,” says Jones, who runs Jones Truck Brokers. “There are costs associated with a trailer but also profit. You make the money the company leasing the trailer to you would make.” He estimates he earns an additional $400-500 a week using his trailers on runs between Missouri and Texas.
“That’s where the money is,” says Davis, leased to Ace Doran Hauling & Rigging. “It’s more lucrative. You get about 12 percent more on the gross revenue — that’s about 19 cents a mile.”
Jones and Davis take different approaches, though, to length of ownership. Jones holds for the long term. His three trailers are 1992, 1994 and 1996 reefers. His 1996 96-inch-wide unit “is as good as when I went to the factory to pull it home. A good spec’d trailer today, there’s no reason you can’t use it for 20 years.”
Davis trades trailers every five years. He trades before the bushings wear out and before he has to replace air bags and brake drums. “A trailer will hold its value better than a tractor,” he says. “There’s always somebody waiting on my trailer when I’m ready to sell.”