Leasing at Prime
Discussion in 'Prime' started by ironpony, Jun 25, 2012.
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I was wondering? I read a lot of comments from company drivers that criticize L/P operators by stating that they don't understand why someone would lease if their take home pay is about the same as a company driver. If I am to understand the L/P programs correctly, don't you own the truck after a certain amount of time? If so, you would have to amortize the residual value of the truck over the time you were paying for it and add that amount to your weekly income, effectively raising the amount of revenue you recieved. - OR - do I owe you all an apology for talking stupid?
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There are three forms of lease at Prime: The first is a straight lease - you pay for the use of an asset to generate income. Those lease payments are completely tax deductible, and the depreciated value of the truck is used as a purchase price if you care to exercise that option at the end of the lease period. Your lease truck or a similar used truck can be purchased outright if you obtain your own financing, or you can enter a traditional lease/purchase agreement for a 2 year period - at the end of the period, your truck may be leased onto Prime assuming it meets their inspection criteria. The third form is a 3-year lease/purchase agreement with a cash down payment - you own the truck free and clear at the end of the period, but it does come with higher payments.
How you do depends on how efficiently you operate the truck - plan and simple. If you invest the money necessary to keep the truck in top shape (something the company guys don't always do - even if they aren't financially liable for it,) do a good job managing your business - you can make a lot of money as a LP. But you can also crash and burn! That's entirely up to you, and your business management skills. For me, it's one of the best decisions I've made while I've been here.
Bottom line: You couldn't get me to go back to being a company driver for any amount of money.Last edited: Nov 28, 2012
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Yes, Prime does provide an amortized payment schedule. You can pay it off early, or pay it down with extra payments. That is for the lease purchase.
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Hey IP, i'm considering this lease. just wondering, when you have time if you could break down what all the fixed costs are? I know success leasing charges like a .045 mile charge. i can't remember all the other mileage charges there are like for maintenance, tires, fuel taxes. maybe you can refresh my memory? I also read where you figure how much you need to put back for taxes, you said 5.6% of your gross. Now is that your gross before any expenses come out or your net gross after expenses but before your personal income and self employment taxes? And if you don't mind sharing, just curious how much you gross on an average vs. your mileage for an average week?
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Disclaimer: For anyone looking in I really don't care what you're numbers are at XYZ Trucking Co - and that they may be lower, the nonsense that I'm "getting nickel-dimed to death," or any of that other crap. These payments are what they are, and I'm providing the numbers to answer a question. If you want to argue about it, pick another thread or start something in the bad companies' thread, and enjoy!
Tractor rent: $796.00
Fuel card: $1.00
Trip scanning: $5.00
Highway tax: $10.58
Life insurance: $1.09
Occupational Accident Insurance: $55.73
Total: $869.40
Now that's a minium that goes up with other items and a newer tractor with a name you're paying for. Optional stuff includes an APU - $70, accounting services - $21.76, dental insurance - $4.80, health insurance - $79.74. I feel that the APU saves you quite a bit of money over idling the engine. The accounting service breaks down my expendatures so that I'm only spending about 10 or 15 minutes tracking my numbers weekly rather than a couple of hours - the insurance numbers are for a single person, insurance is through BCBS of Missouri, and will most likely go up in the new year. There is also optional short and long-term disability insurance, accidental death/dismemberment insurance as well. I don't have an exact number at the moment, but it worked out to around $60 per week when I was at the terminal a few days ago. You can probably get a better deal on term life insurance on the internet than through the insurance company that Prime is working with.
Keep in mind these are my current weekly numbers... on a '09 Cascadia in the last year of my lease. If you throw in all the optional stuff that you can, an ego-building tractor manufacturer, etc - you can be paying something in the neighborhood of $1100 to $1300 per week. A lot of money, huh? When you throw in everything including some fuel, gross revenue of $2500 is break-even, and I usually am at that level when I decide to take a few days of during the week. If you do a good job with your expenses, run smart, you'll rarely be in the hole here and can make quite a bit of money. That being said, I talk to folks on the same dispatch board getting the same sort of loads who aren't doing very well. It's all up to you and your business management skills here.
BTW... you can take time off here, and not go bankrupt. I'll usually run a load or two during the beginning of the week (cutoff is Tuesday 1600 central time,) and spend the weekend and whatever I have before that at the home 20. Come out again on Monday, and look for something that delivers before cutoff. I am rarely "in the hole" doing that. Thanksgiving week is illustrative. Got a load on Monday prior that delivered in Denver on Wednesday morning. Spent Turkey Day at home along with the weekend, came back out Monday $300 to the positive - it helped that it was a very light load that got me home. I have taken off 2-1/2 weeks this year.
This is a rough explanation that serves to illustrate the process... I won't go into details here.
They take everything that needs to be repaired as a debit, and the tire (this can be negative if you've been blowing through tires) and mileage escrow account ballances are carried over onto your last settlement as well. If you decide to walk away early, Prime keeps the ballance of the mileage escrow account after repairs. Repairs are listed as debits. Once everything is taken care of, you get whatever postive balance is left, or if you didn't do such a good job keeping your tractor up - you owe something back. It's not any different than settling up with say Ford on leasing a Mustang... except for maybe the fun of driving it.
As far as fuel taxes goes, you pay whatever the state tax rate is where you buy your fuel at. Your IFTA tax is whatever the formula works out to - if you pay more at the pump than required you get a refund, if not you're going to have a weekly debit. I posted something earlier on fuel purchasing, so I won't go into it here.
What I do is look at what percentage of my yearly gross the state and federal taxman took the year before, and I apply that forward against my current gross as my quarterly estimated payments for the year. You're legally responsible to pay the same amount in your quarterlies as paid for your taxes the previous year, so that's my minimum payment. Using a percentage of my present gross income helps to minimize any unpleasant year-end surprises if my gross does go up. Using this method, if I recall correctly, I wrote a check to the feds for about $100 last year.
Last edited: Dec 1, 2012
Pouring Coal Thanks this. -
Ok. Thnx man. really appreciate you taking the time to answer all the questions.
ironpony Thanks this. -
just thought of another question IP. do you know anything about this start right program? what exactly is it?
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It's the brand name they've given to the same approach they've been using for quite awhile. I'm not sure of all of the details and its not on the website yet as far as I can tell, but it does include loading the first truck payment onto the back end of the lease to ensure you have some income on the first settlement.
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