Path of Lease Assistance

Max Kvidera | June 02, 2011

“It might be no money down, but you end up paying for it in the end,” says Joe Hoovestol, president of Lone Mountain Truck Leasing, a finance company. His company offers lease-to-own plans requiring $3,000 to $4,200 down with payments of about $1,100 a month over 24 to 42 months.

A few carriers have introduced no-credit-check deals. These contracts focus on driving history, references and where you’ve worked. Like no-money-down contracts, the weekly or monthly payments will likely be higher to offset the carrier’s risk.

“You have to look at the lease in its entirety,” Aaberg says, “and don’t pull pieces apart and look at them individually. People come to the table with stars in their eyes and expect to work half as hard to generate the income they need in their budget. The reality as an owner-operator is you work harder than if you were an employee.”

Be alert to the amount of any balloon payment at the contract’s end and how you’re going to save for it. “Even if a buyout is predetermined, it should be no more than three payments’ worth,” says Dave Strand, president of Wholesale Truck and Finance.

Twelve-month leases not covering the entire cost of the truck often are used by carriers to qualify a trucker. If the operator completes the short lease satisfactorily, the carrier often pays a bonus, part of which can be applied as a down payment on a long-term contract. On the other end, “Anything over 42 months hurts the owner-operator,” Strand says. “The truck is going to be outdated and you’re still making payments as if it were three years newer when you’re three and a half to four years into it.”

Research the carrier

As you interview the carriers about their lease-purchase contracts, ask how much revenue you might generate, availability of miles and referrals of others who have gone through the program. If the carrier is reluctant to communicate, it’s time to knock on another door.

You’ll likely fare better with a carrier that depends largely on independent contractors. If a carrier with few owner-operators loses business, loads are likely to go to company drivers first.

When Mills couldn’t get the miles he needed, he visited Risinger Bros. and saw a sign that says the carrier wants its contractors to get at least 2,700 miles weekly. “I’m getting $1.30 a mile loaded and unloaded, including a fuel surcharge,” he says.

Seferino Aguirre had been driving for an owner-operator leased to Greatwide and heard about its lease-purchase program. The owner-operator paid Aguirre’s down payment and the Dallas-based operator now owns his truck.

Check out the truck

Knowing the truck’s condition and where it came from can help you avoid maintenance problems. Many carriers assign trucks from their fleets to lease programs, while third-party finance programs buy from fleets, as well.

Trucks for lease typically range from a couple years old up to five years. U.S. Xpress owner-operators Roderick Jones and Joel Jaramillo both started with trucks that had just 100,000 miles. However, Todd Long, who recently leased to Landstar, is driving a 2006 truck that had 501,000 miles when he began a lease in 2010.

In cases where you cannot get a truck’s maintenance records from the carrier that owned it, Strand recommends talking with the carrier’s drivers to get a sense of the company dedication to timely maintenance. He says he knows of one carrier where drivers, because of the long wait for company maintenance, take extra runs and postpone oil changes.

  • Travis

    Before you sign a lease-purchase, you may want to check out
    my Kindle book, “Bare-Knuckle Trucking; Strategies for Owner-Operator
    Survival.” I wrote this book to detail many of the ways motor carriers and
    their captive finance companies transfer the capital cost and tax burdens to
    lease-purchase operators while retaining ownership of the truck to indirectly
    control the lease-purchase operator. I actually got the title to my truck, but
    it was through a unique set of circumstances that will not be easily replicated
    at a large fleet. I did learn a lot about the mechanics of the lease-purchase
    process, along with the way motor carriers use lease-purchases to the carrier’s
    advantage.