Fleece/Purchase programs

Your best bet is to track down every driver at every truck stop for that company that you can find and ask them first if they're a L/O and if so, how is it working for them.
Most people that post on these boards are negative and often times haven't driven for that company. They're just passing on gossip they read or heard.
Then have the company send you a copy of the lease agreement and review it in your leisure. Have an attorney look at it and explain it to you. It's worth the hour's charge.
Then you can make up your mind with good facts...not gossip.
the one key feature of ANY lease is that you can cancel it without a severe penalty. (perhaps a $500 bookkeeping fee). Don't even consider one that is non cancelable or requires mediation. There are plenty of good leases out there.

 

Be sure to work up a spreadsheet that calculates your cost of operation. Compare costs to revenue to determine feasibility. Run scenarios for when you take home time and see if you will have negative statements. OOIDA has some spreadsheets and so do I.

You need to look close at the lease agreement. Make sure it is walk away, like Emulsified said. I would also look for a buyout at completion that is fairly low a few are $1. I believe that percentage pay is better than mileage. Make sure the trailer rent is reasonable. Compare what they furnish and how much you pay for what they charge back such as license, permits and fuel tax. Compare what they require you to escrow for repairs and maintenance.

You should also have a cash reserve to cover your personal living costs, in case of break down or slow freight and for home time. If you spend 4 or 5 days at home or broke down you will have a weekly lease payment due before you can generate the revenue to pay it. That means no check this week and a small one next week.

 

I took my above post and developed a more in-depth post for another thread. It is a bit repetitive but has a lot more information so I'll share it.

PREPARATION

Not to be negative but at least 3 times as many will fail as succeed. Plan well. Get at least a year, if not two of experience before you do this. Get a spreadsheet and track your expenses on the truck you are driving. You will use this spreadsheet to calculate your Cost Of Operation in CPM (Cents Per Mile) when ready to start up.

Keep track of what the company spends on the truck and what you spend on living expense on the road. If you can't find the time to track the costs, you aren't ready to run your own business and that is what a lease/purchase is.

Take some online business classes and learn about Business Plans, Income Statements, Balance Sheets and Cash Flow Statements. Find a computer program that will allow you to track expenses and revenue and generate common business reports and projections.

You need to be able to look at each load and figure out whether it is profitable. You can't afford to wait a month to find out you haven't been profitable. If you run short, driver wages are the only thing you can short. Nobody else will wait to be paid.

Save some money for when you start out. Now matter what you make, if you can't save some, you probably aren't ready yet. Chances are you will make little more on a lease/purchase than you are making in driver wages, at least to start with.

Track and record your miles between fill ups and gallons used if possible. This method is more accurate than the on-board computer. Dividing miles by gallons gives MPG. Dividing fuel cost by MPG gives cost in CPM. Example: You travel 1206 miles and use 185.6 gallons at $3.95 per gallon; that is 1206 miles / 185.90 gallons = 6.487 MPG; 3.95 per gallon / 6.49 MPG = 0.608 CPM. So your cost per mile for fuel is 0.61 CPM.

Now try different methods of saving fuel while operating within the specifications of the engine. Try pedal instead of cruise. Try running a few MPH slower. Try progressive shifting. Try to keep the RPM 100 less or 100 more when shifting on pulls. Fuel is the biggest cost so if you can save a little it will make a big difference.

EXECUTION

Be sure to work up a spreadsheet that calculates your cost of operation. Compare costs to revenue to determine feasibility. Run scenarios for when you take home time and see if you will have negative statements. OOIDA has some spreadsheets and so do I.

You need to look close at the lease agreement. Make sure it is walk away. I would also look for a buyout at completion that is from a few thousand to $1. Make sure the trailer rent is reasonable. Compare what they furnish and how much you pay for what they charge back such as license, permits and fuel tax. Compare what they require you to escrow for repairs and maintenance. Make these comparisons to various companies.

It is rumored that there are a few, not many, lease/purchases that require no payment when the truck doesn't run for short periods or that split gross revenue as a percentage to the truck and a percentage to the driver. Either of these would lessen the impact of down or home time and the negative balance that both often create on the weekly settlement.

Some companies exercise little control over your repair/maintenance escrow account and some control it like it's theirs. Some pressure you into having work done at the terminal and sometimes it isn't the best quality.

I believe that percentage pay is better than mileage. It will require more research to do projections. It will also require you to be better at picking loads and controlling deadhead. I don't know if any lease/purchases are percentage though.

You should also have a cash reserve to cover your personal living costs, in case of break down or slow freight and for home time. If you spend 4 or 5 days at home or broke down you will have a weekly lease payment due before you can generate the revenue to pay it. That means no check this week and a small one next week because this week's payment or a portion of it was carried forward.

Be sure you find and talk to drivers who have completed a lease/purchase. The company holds all the cards. It is imperative that you maintain a good relationship. You need to keep disputes to a minimum and resolve them quickly and in a civil manner.

One last thing, you are now an independent contractor for tax purposes. You will be required to save money and pay quarterly payments. You need to pay IRS quarterly for Income Tax and Social Security. You need to pay your state, if they have Income Tax, quarterly also. Based on my calculations this will vary between 4% and 8% of gross revenue or between 0.06 - 0.13 CPM. These quarterly payments will most likely be around $1,500 - $3,000 per quarter.

If you don't pay enough in, you will owe interest and penalties. In addition, you will likely owe so much that you won't be able to afford to pay it all at once. This will vary greatly depending upon your tax situation and your equipment and expense deductions. You need a tax professional to help you calculate this unless you understand the mechanics of taxation. There is an owner who is leased to Crete posting on this forum that paid $13,388 last year to IRS. His truck is depreciated out so taxes wouldn't be that much for the first 3 - 4 years.

If you buy a truck and finance it, you own the truck and the title will be in your name. If you lease or lease/purchase a truck, you do not own it until the contract is complete and the buyout is paid, the sellers name is on the title.

 

I don't know anything about a L/P but have really read nothing but "don't do it" or " I told you so". Even you called it a fleece. That should tell you something right there!

I gotta ask who you wrok for? Warn others out here. There is no way that any driver should have to get "creative" to make a living. Period.

If they feel they need to, I suggest finding another company that has yourself and your families well being, anong with their own in mind.

With all of the risks, who does that anymore? what drivers are on the road with the rest of us? professionals, sterring wheel holders and those that need to break the law to make living.

Heres a thought. Find a career out here insted of a job. These bad companies will fall by the wayside and the career companies will rise to the top. They will if we can steer the knew blood from falling into their trap. it won't happen but it's a thought.

 

The secrets to L/O

1. control your fixed costs
2. manage other costs as you can (fuel, tires food etc)
3. don't carry extra fuel past the settlement date
4. schedule home time at the end/beginning of the settlement period
5. don't skimp on maintenance accounts, but if you can move as much as possible off company books so if you leave you take as much of your money with you as possible.
6. keep all non-food receipts
7, set aside $25 per hundred after fuel to cover taxes until you know what your tax bill is going to average then adjust from there.
8. Protect your CDL at all costs. (speed, HOS, following distance, dash cam etc)
9. don't get into pissing matches, you'll lose. A mile with a .1cpm profit is better than no miles with payments stacking up.
10. if you can buy instead of lease- you will drastically cut your fixed costs.
11. Investigate the companies real cost of leasing
12. New trucks have warranties, but old trucks have lower payments so find a balance you can live with.
13. APU's save fuel big time, but add to the end of lease purchase price.
14. DIY where possible means less shop rates you have to pay.
15. understand the lease is not favorable to you unless you are willing to play by thier rules. The lease carriers have set up an industry standard that preys on drivers. it sucks, but it is what it is. There is no honest lease carrier, if there was the other companies would be forced to match them or lose their drivers. You can make money but you have to do it their way. Expect to be out longer than as a company driver with less days off when you do take home time. Expect to be given a higher percentage of junk short hauls and longer deadheads where the company shifts costs to you. Expect high "administration fees", insurance rates that are not competitive, high deductibles, and other hidden costs that transfer settlement money from you to them.

 

A lot of good information here.

No. 3... Buy fuel where and when it's cheap, and don't worry about "carrying extra fuel" around. You're playing for the long game here, and thinking only as far as the end of your current settlement is not a winning game strategy.

No. 15... Find a carrier that doesn't match this description and stick with them... because good, honest carriers are out there. If you want more time off, stick on the company side. If you want the satisfaction of running an efficient business that has the possibility of turning into something better and larger - be prepared to do the work that's necessary to make it happen.

No. 16... Your settlement check is cash flow into your business - its not your paycheck, so don't treat it as such. One of your fixed costs is your "driver's" salary. Pay yourself - just the way any employer has paid you in the past.

 

carrying fuel is money you've spent but not been reimbursed for. If you break down that fuel is a an added cost that could cause a driver to go negative. Ending the settlement week low on fuel means your not carrying money forward in liquid form. That is long game thinking. its easier to stay out of the hole than climb out of it.