Purchasing your lease truck...

As Squeak said things change. I was told (in writing) that IEL doesn't finance leased trucks. But I was also told (it's in my contact) that I could not convert my truck to a 13-speed. In December 2013 IEL told me that I could convert it to a 13-speed.

Things change.

 

I had a really nice conversation with Rebecca at IEL today. My lease is done this coming October. My residual is $51,850 less any excess mileage I subtract between now and then. I can buy my truck with no down payment, no credit check and my payment will be $550 which is $25 more than what I'm paying now and all the other costs remain the same. The payment term is 2 years and 3 months. There is a 250,000 mile service contract available on the engine that will require an inspection in Phoenix. There are four plans available and the cost will extend the term but not increase the payment.

I have a hard time with the concept of buying a business tool when I can simply pay the cost of depreciation while I have the use of that tool. OTOH, and isn't there always one of those, there are a few things about my truck that make buying an attractive proposition. Or nuisance? The list includes no DEF, pattern problems fixed, outstanding fuel mileage, known maintenance history, nothing available that I want to drive and a great deal.

We shall see.
Frank

 

Frank,

If you BUY your truck then you get to depreciate it on you taxes vs simply writing off the lease payment as we currently do. I know that there is a limit as to how long you can write off the depreciation but have no idea how long that would be.

 

It definitely sounds like Swift has changed their tune with regards to financing leased trucks in house.

Makes sense considering that most O/Os coming off a lease have little or no chance of getting their trucks financed through conventional means.

 

I think they got tired of everyone turning their trucks in ... I had to put up 20%, plus pay the sales tax up front ... would have taken too much of my cash. So I turned the truck in and took a buy out on a used company truck. No down payment, they financed the sales tax and I got the 30 day bumper to bumper.

I know that's what a lot of the folks were doing at lease end, due to the high down payment. That or going outside to get a truck or leaving the company altogether.

And on a company buy out, after completing a lease you know how to work the system, what to look for on a used truck and how to maximize the 30 day warranty. It would have been cheaper for IEL to cover my down payment, than to have paid for all the work I required on the truck I bought.

 

I have a feeling that the reason why IEL is going the financing now is because, if some flat out buys their truck with outside financing they can take the truck anytime they want an go some where else. Where if IEL finances they can force you to stay with Swift. If you try to take it some where else, they can call the loan "due" and payable in full. If you don't pay it they can take the truck back.

 

I have a couple of questions for L/P folks:

1. Are you paying yourself a salary and taking out payroll taxes?

2. Over and above your salary AND maintenance reserve are you ALSO making a profit?

I'm asking this question because when I become an O/O I would like to be in a situation that will pay me a good salary (based on percentage of truck income), build and maintain a healthy maintenance reserve, and ALSO provide a healthy profit on top of all that. Seems to me that is a pretty tall order to be an O/O with Swift/Central, with the $0.90 per mile plus FSC. Based on how I crunch the numbers I can't see how this situation is anything other than paying for a well paying job.

 

Following up from my last post above, I'm speaking from the experience of my O/O brother. When he got back in the industry a little over two years ago he bought a truck at auction and leased on with a small outfit out of Southern California running dry van back and forth primarily to the Midwest and sometimes to the East Coast. He was paid $1.35 without any fuel surcharge.

He struggled.... mightily.

Granted, he didn't have an adequate maintenance account when he started and quickly got behind the 8 ball with an older truck, but my gosh at $1.35 he was barely making enough to sustain himself without a truck payment. Having that older truck turned out to be something of a blessing in disguise, as he fled CA on 12/31 and headed to OKC since he didn't have the funds to comply with CARB. A couple of months without income, but scouring available opportunities, and he's landed a pretty good gig with a company that services the oil fields, making a percentage of the load. It's two months into the gig and he's averaging about $8500 per week to the truck, with far fewer miles and much lower fuel costs, and he's astonished that he's finally making some money in trucking after all this time.

Just seems that if you are going to go to the risk of owning your own truck, might as well have a gig that pays well enough to have a profit on top of your income. He's considering the concept of buying another truck and hiring a driver, becoming a fleet owner leased to the company. I've never talked to any O/O's at Swift that own multiple trucks. That speaks volumes.