Mega Carriers Killing Rates

That is why I had thought the price on getting your authority needs to go up, particularly on the broker side. But as soon as it did, it would just centralize the lease scams by established brokerages/carriers. In the end it would change nothing, the stupidity would still carry on in the industry.

 

Many states you need to have a DOT number just to get plates. # is not going active to haul but is needed for some crazy reason at the state level. Then you have all that are applied for and nothing is ever done. The ones that fall out and brokers.

So it is not as ugly as it seems. Doubt we are net many new carriers.

The easiest account to get for a broker is flatbed freight that blast out emails. Shipper doesn't care as long as that seasonal load is being covered.

 

There is a whole part of this industry based on stupid as with one carrier they made more leasing trucks then they do hauling frieght and don't really care about the margin as long as they have enough to pull the payment out of the settlement

 

Love to know who this was? Most public companies have had to justify the lack of money from the lease side in that the lease truck averages more miles.

 

I think his comment was more along the lines of the fleece/purchase programs, where the carrier OWNS the FINANCE COMPANY (seperate entity). So it's not the CARRIER that's financing the equipment, but an entirely seperate entity - even though the carrier has the "exclusive" on the use of the equipment, and can profit on forced insurance placement, forced maintenance, etc. Win/Win for the carrier and the leasing entity.

The (commonly complained of) trend, is once the company driver goes lease - the miles drop. It's not the the COMPANY OWNED trucks, with low cpm company drivers are not moving at a rate profitiable to the carrier - but there's less "loving concern" on the carriers part to ensure the L/O's are getting the mileage they need to actually suceed under the terms of the lease and the operating agreement with the carrier.

The carrier gets to "churn" the trucks in it's (wholly owned by a seperate subsidiary) leasing division, making way more on the equipment, than it's actual value - without regards to the poor schnook that got conned into entering in the arrangment in the first place.

Since the seperate company does the finance - it is ALL PURE PROFIT, and doesn't hurt the parent carrier in the least. Just more "meat in the seat", and it's treated as a profit center - seperately from the operational books of the parent carrier itself...

Rick

 

Exactly the reason why most L/Os don't do well on mileage based lease programs, and why one should never, EVER lease from the company that also controls your freight.

 

That is what I was taking away from his comment. But most L/P's are not money makers for companies. They are a means to and end. For training companies that need teams it is a way to get teams running loads cheaper. Some companies it is a way to get more miles out of a solo driver. And others it is a way to extend the life of a truck vs having to sell it and lease newer trucks.

But of all the public companies that I have looked at that have lease programs I have not found one that a lease program is a significant profit center. For most, straight lease, it is a loss leader and they make the money on the additional freight.

So would be interested in knowing what company figured out how to make all this money on these programs.

 

I have one for you BBB, but I would like to PM the details to you so you can double check. I would hate to post it on here if it's not what I think it is, because I know the company follows threads on here. But if it is what I think it is & based on info I gathered I think they need to be exposed, even though they don't hide what they are doing. I think people that sign on with them don't understand how to calculate a APR.

 

Just shot me an email.

 

A majority of the majors - don't actually handle the "truck financing" themselves - at least not the actual CARRIER corporation. The finance end, is a separate company, that's taking a truck that's (probably) already been fully depreciated by the carrier - and getting "lease income" from a truck that is in excess of what the trucks current market value is.

The companies that are "leasing out" new units - is still probably the same thing - the LEASING/FINANCE arm is purchasing (or perhaps even leasing themselves) the equipment, and eliminating the carriers overhead of operating the equipment.

As far as "loss leader" goes, from what we hear on most forums: some guy leases a used unit, runs for a bit, get's "starved out" until he's running negative settlements, then either walks away or gets cut loose. At that point, they just put SOMEBODY ELSE into the truck, and do it all over again.

Depending on how the truck/cash changes hands, when the title goes over to the "leasing arm": the carrier purchases the equipment, expenses it out via depreciation, sells/transfers it to the leasing arm, and continues to generate income from the equipment (churning).

Now, I'm not saying, for the "hard runner" that stays in good with his FM - that he can't make more as a L/O than as a company driver - but the carriers first allegiance is to the company truck - as that's where they make the most revenue over cost-of-operating. The lease $$ from the leasing arm, comes in on the back end...

Rick