Want to avoid getting burned by a lease-purchase agreement?

My driving school instructor has been praising lease-purchases due to the tax benefits and he said that a lot of them are "walk away" (hand over the keys) leases. He said that he was netting 50% more than when he was a company driver and he had a $1 buyout at the end. He sold the truck for about 15k and started a new lease.

I just don't understood why companies would have an LP program if the drivers are going to net an extra $0.18 a mile. Either he's not being truthful or the company he worked for wasn't in the business of taking advantage of LP drivers. I just dont understand why a company wouldn't just lease an extra truck themselves and end up paying a company driver. Unless, possibly, drivers that lease are more productive, take care of their trucks better, and are generally more efficient than company drivers. This increase in productivity helps the company as well as the driver. And maintaining the trucks and driving efficiently might give the driver more room for profit.

I'm guessing the problem lies in the lack of freight. If a company (CRE, CRST...) doesn't have enough loads to keep all company and LP drivers rolling, in order to maximize profits they have their company drivers take most of the loads in order to pay for the fixed expenses such as truck payments, insurance, overhead, business expenses, etc. And give the left overs to the LPs because they don't have to worry about making insurance payments on the truck AND the LP driver is paying them whether they get loads or not. LP is also a great way to get a large amount of money out of trucks that may be too old and expensive to maintain. And having a LP driver taking all those maintnence/insurance/fuel responsibilities, paying over market value, and being an extra driver on the road to help optimize load utilization is a GREAT business model.

IDK maybe I'm way off base here, just my loosely formulated thoughts...

 

Most companies say that L/P are more productive. There are also some tax advantages for the company having L/P's vs. company drivers. Another is the company shifts fuel mileage concerns to the L/P.

 

Another issue is that the company gets rid of the headaches involved with employee drivers. There is another thread about giving notice when quiting a job with at least one driver bragging that he never gives notice, you get rid of issues like this when you use I/C drivers. Take a look at all the threads in this forum and imagine that these drivers are driving your truck, pulling your loads and responsible for your reputation with your customers. There are a lot, if not most lease deals that you should run, not walk away from, but if done right can be a real opportunity to step into your own business.

 

Gotta do what cha gotta do, but if you can avoid it, by all means do so!

 

And the walkawy clause you spoke of ? Just Cost a driver $636 or something like that. See the Prime thread.

His dealings with Prime over 20 or so days cost him around $6 grand. ( or so he says ) Most deals ( including mine ) are structured pro carrier all the way.

 

Can u say backup money. If a driver honestly wants to.do a lease purchase then he better have the bank roll to cover his rear if something goes wrong. These new drivers that get this cloud 9 talk about how great it will be have forgot the main purpose. To run it like a business. You dont open a fancy truck stop and then dont have cash flow to put fuel in the tanks or product on the shelf. JMO

 

What about these companies that do the deductions by the mile?Seems like that would work much better because you are not getting gigged for hometime or downtime, just a thought!Also if you are a good bookeeper you know exactly how much your settlement is going to be everyweek. I my experience I have found that most people that do lease purchases couldn't even balance a checkbook yet alone run a business. I successful paid off 2 trucks through Dart Transit.I watched my bottom line and fuel mileage and watched every penny, put 20% of my bottomline in a tax escrow account, and still cleared $62,000 a year for the six I was there. I sold my last truck to help run my fathers furniture business, When the recession hit went back to the old standby.You have to be a businessman first and a driver second.Just my 2 cents worth!

 

Good job Tennessee but ya got to remember dart had one of the best lease programs out there and you knew how to do it. Now if some of your knowledge will pass on to the newbies that would be good huh

 

Had or has? Just curious.

 

Ya know big orange im not sure. Dart did have one of the best lease purchase deal long before all these companies started going that way. I do know guys were making money and owing the trucks after they fulfilled the lease. I think they still do it not to sure ya might want to ask Tennessee.