Count the Cost of leasing onto a company as an Ownere Operator

I thought I'd put together a list of cost(s) considerations for those considering leasing on to a companies authority, or obtaining your own.

This list is NOT exhaustive by any means. Others here have proffered their own list, so I figured I'd give it a shot.

The reality is that different types of operations incur varying costs, however, this list might provide a bird's eye view of what to expect.

Fixed Costs
Truck Payment
Trailer Payment
Insurance (equipment & cargo)
***In the event of an accident, where will the money to pay deductible come from?***
Factoring/Quickpay
Gap insurance
Life Insurance
Tow insurance
IRP
2290
Loadboard
Phone & Internet
Elog
Prepass
Tolls
Permits
Accounting

Variable Costs
Truck fuel
DEF
Relevant road tax
IFTA
Truck maintenance
Trailer maintenace
Downtime contribution
Equipment replacement contribution
Parking
Memberships/Subscriptions

Wages & Benefits
Wage
Per diem
Retirement
Health insurance
Vacation pay contribution

Payroll costs
Company matching taxes
Worker's comp
Unemployment insurance
Disability insurance

I'm sure there's more that can be added to the list. However, after taking a pad & pen to the list, I think it's abundantly clear WHY these Company CEO's are more than happy to sign lease operators at $1.30 to $1.50 per mile and to allow the lease operator to bear all liability.

 

When I worked inside the corporate office, I used to ask lease ops, for instance, if they could tell me what their fixed monthly expenses were. The question inevitably drew a blank stare

 

Well they are supposed to as a lease holder, they are providing a service to the carrier and operating under their authority in return for straight compensation.

this is the relationship that was created long ago and no one forces anyone to take $1.30 a mile as a lease holder.

 

Good post. It should be required reading for every newbie that decides he wants to get into the trucking business.
We see it on here all the time...if the driver has a little money left over at the end of each settlement period he figures he's making a profit.
If I was riding the ragged edge that some of those guys are I don't think I could sleep at night.
If they use your post as a cheat-sheet maybe they'll wake up to the actual costs of doing business.

 

Thank you for your kind words.

Anyone with a basic understanding of how to create a spreadsheet can take the basic outline of what I've posted here and develop their own.

It's a real eye opener when one plugs the numbers in and to see how much it actually cost to operate one of these trucks.

 

When I was in business for a couple years one day an old timer stopped in and lectured me on knowing my costs down to the penny. He said if I don’t figure that out then I’m just pissing in the wind. lol.

Needless to say I took it pretty serious and began really figuring things out after that. When your a newbie somehow it just seems not too important which is a fatal mistake for your business.. Or people that don’t account for ALL of their costs. They think ok truck payment and fuel and I’m good!

Great post!

 

A question I always ask guys who are considering the lease op route is this, can the company you are going to lease on to operate that truck profitably, with their own employee, for the same amount they are offering you?

I can assure you, the answer is no.

So then, it stands to reason if you're going to operate a truck as an independent owner operator with your authority, it's equally as important to have a good grasp of the real numbers before you take the plunge.

Because if not, you'll have your head handed to you before you know it.

 

Overwhelming list. Good job discouraging those too euphoric.

 

I had forgotten to add Factoring/QuickPay into the variable cost section. I don't use it myself, however, many do and that number in itself can add a pretty significant hit to the bottom line.