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What is a Lease-Purchase Program in Trucking?
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WRITTEN BY: BLOOM SERVICES
“What is a lease-purchase program,” you ask. Well, hold onto your trucker hats, let’s delve into what they are about and how to select a good program for you. Lease-purchase programs are for OTR drivers who dream of owning their own truck, but either don’t have the credit for a conventional loan or don’t have the deposit money needed upfront. That is where the lease-purchase program comes in.
What is a Lease-Purchase Program?
The lease-purchase program is a hybrid program, which is similar to renting or leasing a truck, but with the option to own the truck at the end of the term. It is a bridge between being a full owner-operator and/or independent contractor. Most lease-purchase programs involve working for a carrier or owner-operator, you agree to make a certain number of payments and when the term is up, you own the truck. During the term, you will not be able to take the truck to other companies or carriers. Hauling cargo for the carrier will go to paying off the truck, but you will also earn a great deal more money than a company driver.
Types of Lease-Purchase Programs
There are three types of lease-purchase programs, each with its own unique terms and conditions designed to fit different preferences and circumstances. The three types of lease purchase programs include lease operator, leased owner-operator, and independent owner-operator.
Lease Operators:
Essentially, you are leasing or renting a truck from the carrier. When the lease term wraps up, you give the truck back. It’s like borrowing your buddy’s car, but you have to give it back when you are done. Also, the equipment isn’t something you really have a choice on, so with some companies you might be driving around their “lemon”. This option can be good if you’re short on a down payment, but there is a kicker – you won’t end up owning that truck in the end. So, if truck ownership is your dream, maybe skip this one.
Leased Owner-Operator:
Leased owner-operator is the most common form of lease-purchase program. In this program you are leasing from a carrier and hauling loads under their authority, but at the end of the term you will own the truck outright. However, there are sometimes down payments of anywhere between $10,000 to $15,000, depending on the large range of newer trucks you choose from.
Independent Owner-Operator
This one is a bit different. Independent Owner-Operators do not lease-to-own from a carrier, but rather enter into an agreement with a third party. This does provide you with more freedom and flexibility, but this program is more uncommon, and you often will not have the additional support a carrier would provide. However, you can choose to work with any carrier you would like.
Advantages of a Lease-Purchase Program
There are multiple advantages to considering a Lease-Purchase program. Lease-purchase programs can be an excellent option for OTR truckers who are looking to become owner-operators without the high cost and risk of business ownership. Here are a few advantages:
Lower Upfront Costs
One of the most significant barriers to becoming an owner-operator is the high cost of purchasing a semi-truck. The average cost of a new Class 8 truck is over $200,000, and even used trucks can cost upwards of $70,000. By joining a lease-purchase program, you can avoid the high upfront costs of purchasing a truck and instead make smaller monthly or weekly payments. This can make it easier to get started in the industry and build your business over time.
Predictable Expenses
When you join a lease-purchase program, you’ll typically have a fixed monthly payment that covers the cost of the truck. This can make it easier to budget for your business expenses and avoid unexpected costs. Additionally, many programs offer warranties and maintenance plans, which can provide added peace of mind and protection against costly breakdowns.
Flexibility
A lease-purchase program offers the advantage of eventual truck ownership, providing greater control over your business. This ownership also grants the opportunity to sell the truck for a profit in the future. Once the truck is fully paid off, you have the flexibility to choose any carrier you want to work with.
Newer Equipment
You have access to newer equipment with a lease-purchase program, often these trucks are also under warranty. In a rental program, you might not always get the truck you want, but in lease-purchase you will have options for the truck you want. Many truckers get into brand-new trucks with zero miles.
Considerations for Opting for a Lease-Purchase Program
With any decision, it’s important to take into consideration multiple factors before leaping. Here are some key points to consider before opting for a lease-purchase program. Exploring these aspects will make sure you’re making a well-informed decision that fits your specific needs and situation.
Lack of Total Freedom
When working with a carrier to lease-purchase a semitruck, you will need to agree to the general working conditions. You will be required to take loads they book for you and run routes you may not always want to run. You probably won’t be able to pick your own loads nor pick up loads for other carriers. However, good companies will book you the best-paying loads they can and will help you become successful.
Business Considerations
In most cases, you will function as an independent contractor on a 1099. This entails taking on the responsibility for all necessary business paperwork and tax obligations. The overall management of business operations rests squarely on your shoulders. If you anticipate challenges in handling these responsibilities, a lease-purchase program may not be the right choice for you.
Risks and Rewards
There are a lot of risks and rewards. Primary risks are if you are not able to run the miles you need to run to be successful, it will be near impossible to win the game and own your own truck. You have to be prepared to run to be successful. So, if you are a ‘hang-out-at-the-truck-stop’ type of driver, you might want to stay working at a company. But, if you are motivated and able to run, you can not only buy your first truck, but it will allow you to become a true owner-operator.
Earning Potential in a Lease-Purchase Program
Lease-purchase programs not only give you the ability to own your own truck, but if you partner with the right company, it can be quite lucrative. Many companies structure pay by either mile or gross load percentage. The general range of mileage pay is .45 cents to .70 cents per mile. Now, this is the least lucrative program, you would only average $1,300 to 2,100 dollars a week typically with this type of pay structure.
Gross load pay structures range from 60% to 82% gross load. This means, that whatever the truck grosses for the week, you will make a percentage of what you deliver.
However, you will be responsible for truck payments and fuel in this program. If you partner with the right company, you can easily make $120,000 plus a year after all expenses. But, if you partner with a company unable to get you good paying loads and the miles you need, you could make as low as $50,000 a year or less. So, it is important to partner with the right company.
To find the right company, look at the reviews and ask for recent pay stubs from drivers. Companies should be more than willing to give you these. Also, consider the dispatch they offer. Dispatch makes and breaks a trucker’s earnings. Good dispatchers will help you earn more.
Bloom Services Offers a Lease-Purchase Program, Start with
$0 Down
Here at Bloom Services, we offer a lease-purchase program with no money down. For trucks over 100,000 miles, there is no deposit, for trucks under 100,000 miles you may need to put down a deposit of roughly $10,000 for a brand-new truck. We generally offer Volvo 860s and Freightliner Cascadias.
We pay 82% gross load and we pay for the cargo, liability, and trailer rent. You would just pay for truck fuel, insurance, and a few other small expenses. Our drivers average well over $120,000 a year and average over $3,000 a week take home. However, we do have a few requirements:
- We require 2 years of Class A CDL experience.
- You will need to be out for three to four weeks at a time.
- And, you will need to go to all 48 states.
If you meet these requirements, we want to hear from you so we can discuss our programs in detail. Contact us today to start your journey toward becoming an Owner-Operator with us.
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