Leasing at Prime

It's a guaranteed floor to your linehaul revenue only. We're paid a percentage of linehaul, fuel surcharge (calculated from the fleet average per gallon price) and accessorials. The guarantee is calculated as an average over 100,000 miles- if you drop below $1.02 on a new contract or $0.95 per mile on an old contract, they cut you a check. There's also a short-term revenue guarantee where they advance you cash if you drop below those levels, but take it back when you start making money as well.

In practice we hardly ever have the guarantee kick in. During the recent economic downturn it did help keep folks whole.

Yep... that's why 4 out of 5 folks can't make it work. So simple even a caveman can crash and burn. There's a bunch more to it than that bucko.

Yep. You got it all figured out. You'll make millions off of that first check. (right)

In practice what it does is to keep you from going into the hole during your first week. Usually it's only a partial week, and most new lease ops have a bit of a struggle getting going. The deal is that they kick the firsts weeks' fixed costs onto the last settlement of the lease... you still pay for your fuel. IIRC, on my first lease that HUGE first check was $500 or $600. BTW... that's a really substandard week!

Take your own advice acido.

 

Vietnam-era vet. Lotsa time in the Far East.

Your lease payment is locked-in at the time you sign your contract... so what I am paying now has no bearing on what you might pay. I was quoted $1300 per week on a new tractor on a 3-year lease last spring. That sounds pretty bad, but here's the deal...

That number is generic, and will vary from tractor to tractor. The Freightliners have the lowest payment, while Pete's and KWs are higher. It does not include some other costs, but does include all of your insurance. The other stuff is about $150-ish per week that covers plates, permits, qualcom, etc. Some of your variable costs included in this are a 1.5-cpm contribution into your tire escrow fund, and 4.5-cpm mileage payment. The mileage payment is deducted to cover repairs in case you terminate the contract early and end of contract repairs... you get what's left over as a "lease completion bonus" if you don't trash the truck. For me this included $1 for the fuel card, $5 for trip scanning, $10.50 for federal highway tax, $37.50 license and permits, $55.73 occupational accident insurance. It still adds up to around $1300 per week.

Extras include an APU rental payment that was $70 per week, basic accounting breakdown of your settlement (highly recommended) $21.75 per week. Health insurance will be available for independent contractors going forward... but as an IC you will be able to go out on the open market or through your home state insurance exchange as well. This is all in flux right now, and we won't know where it will end up until sometime in November. My insurance is $86.76 per week through the company's BCBS of MO policy right now. It's changing.

So we have this big payment. It's around 25% of my gross revenue consistently. Fuel is another 33% of my gross revenue. Electronic toll payments are assessed from PrePass weekly as well. Maintenance is largely covered by the drivetrain warranty through the tractor OEM, and the engine manufacturer's warranty. Any costs you incur for maintenance will be taken out of your settlement, but Prime will spread those payments out. For the usual few-hundred buck type things, they'll take it out at $100 per week. You can direct these things to be taken out of your emergency fund (optional but highly recommended) with a quick phone call to payroll. Tires are charged to your tire escrow account, so you won't see any of this until your contract ends, and the tire escrow account is reconciled. The upshot is unlike many other carrier lease agreements, most of your maintenance costs will be absorbed by the warranties and the tire escrow account. Freightliner and Detroit Diesel does the best job of standing behind their warranty. Peterbilt and Cummins are the worst.

If you look carefully at the above paragraph, you'll note I mentioned fuel. It's the 800-pound gorilla in the room. There are two sides to it... purchasing and fuel economy. While all of your costs are important, and keeping a handle on them is double important... the fuel bill is what makes or breaks you. Some folks will tell you not to buy fuel just before the cutoff... they tell you this because the biggest complaint in all of this is the folks that look at the settlement check as a paycheck. It ain't. If you're only keeping $500 or so per week out of your gross revenue (that's piss poor,) one single fuel purchase can kill your settlement check. It's cashflow into your business, and you must put yourself on a driver's salary... that's an expense. If you do a good job at buying fuel, that means you are buying as much cheap fuel as you can where AND when you find it. The other side is keeping your fuel economy up. You can't tear around at 65 mph everywhere and make money at this. My long-term fuel cost is 10.4-cpm (as we figure it)... and it's been running around 8-cpm the last year or two. Contrast that with the guy on my FMs board who is averaging 32.5-cpm in long-term fuel costs. This is where you will or will not make your money at. You've got to run as slow as your schedule will allow you to, learn to efficiently run the hills, and buy your fuel correctly. Mr Lead Foot could get a 25-cpm or so raise just by figuring this out. He's probably one of the guys at the truckstop biotchin' about how come he doesn't make any money at this. Not buying fuel correctly can cost you thousands in the long run... and the long game is what this is about.

It's about the gross revenue, and how much you can get from your trips each week. It's not about the miles, and especially not about trying to get more miles with more speed. My long-term average gross revenue is $1.702 per mile for all miles loaded and empty over the course of my last 3-year lease, averaging 2359 miles per week. That's reefer division, running solo - no teaming, no training. Those are my numbers, and yours may vary. None of this is guaranteed... and can't be. It's luck of the draw. Now all of this being said, my fixed costs were running at $1100 per week on a 3-year lease contract initiated in 2010 on a 2009 Freightliner Cascadia. The difference from what I was quoted last spring is representative of the cost increases on a Freightliner Cascadia 3-year lease. Short term leases on trucks turned-in early are available... when they have one.

I mentioned you have to "be into your numbers." You've got to do your own book keeping (not tax preparation... that's different) so you can KNOW what it costs to run your business, if you're making money, and how you might improve your business. Pretty consistently, over the life of my last lease it cost me about $425 per day to RUN my truck; all costs less driver salary. My fixed costs to sit over that period was $155 per day, less driver salary. My gross revenue per day has been running about $580 per day. These are all long-term averages, and do not reflect the up's 'n downs of day-to-day and week over week variations. It's very important that you have cash in the bank to absorb the variations in this, and also very important that you financially separate your business from your personal finances... especially if there is a W.I.F.E. involved. She can't be blowing your settlement checks at Cheap Stuff is Us on a regular basis.

I put $100 per week into my emergency account, and I'd recommend more if you can. I paid my maintenance costs out of current revenue, so my emergency fund amassed around $15,000 at the end of my lease, and I had about $9,000 left over from the mileage escrow and reconciled tire escrow. I used some of that to put a down payment on my tractor.

I hope this helps.

 

All escrow accounts earn the account holder (that would be the IC) interest per federal law.