What would an experienced o/o buy?

At least he understands you have to see things with 2 brains. Business brain and driver brain. Business brain says gee I found a sucker to loan this company money at 0%. Sometimes even business brain finds a driver to work for less than going market rate. All the while the profit for the business would not be enough to cover a typical wage and interest to borrow capital. He's already way ahead of most.

 

I agree with you. You don't need a business degree to learn how to run a truck profitably. Or any business for that matter. However, what I'm talking about is recognizing the value of ones own capital and the need for a business owner to demand more out of his business than just the opportunity to own a very expensive job.

That said, I am new to trucking, and I want to learn the business side of it because I have always wanted to own my own business. Plus I don't want to spend my career getting gang raped nightly by Swift and other companies that don't give a crap about their drivers. I want to own my own fleet. I'm here to learn from other peoples experience. Whatever it is that experienced people tell me is going to work, that's what I'm going to do.

 

I have been running the numbers on Swift's lease operator program using the fixed expenses and sliding pay scale in the pamphlet they give me and my own real time fuel cost, miles driven, etc. The first problem is that they call you an owner operator when really you are renting a truck. Swift owns it not the driver. Second problem is, the refrigerated rates are lower than dry van. Third problem is the fuel surcharge is $0.03/mi as of Summer 2017. Fourth problem is, after all my figuring, it's not possible to take home more than $600 or $700 BEFORE TAXES driving solo. (And, as a business owner, self-employment tax equals twice what you pay as an employee for FICA and Social Security.) Their own leasing recruiter said you pretty much have to mentor to make money. Fifth problem is that the recruiter I spoke with thought "variable expenses" referred to the fact that fuel cost fluctuates.

I also have all the needed info for Knight's program. Knight and Crete both give you a good deal on used trucks that are still under warranty. Swift wants you to take a brand new truck and let you take a bath on the depreciation for them, all the while paying a $0.09/mile premium for all miles driven over 11,000 during the month. They say this helps buy down the residual value at the end of the lease. What it really does is shift the cost of excess wear and tear to the lessee. As if paying four times with the truck is actually worth isnt enough for them!?!? And they know statistically most people will not buy the truck at the end of the lease, so whatever reduction in residual value the "fleecee" could have captured will be lost when he rolls into a new lease. Other companies I have talked to want to get you in a sturdy, inexpensive truck and help you make money. It's a win-win because they are selling off their old fleet equipment and new independent contractor drivers get an opportunity to get into a truck without a ton of overhead.

Running the numbers using Knights fixed expenses and pay scale, the difference is night and day. One actually stands a chance of making a decent profit, paying off the truck, and achieving a really nice cash on cash return, potentially buying more trucks/a newer, nicer truck when the time comes (provided, of course, that the owner knows how to maintain his equipment properly and budgets for maintenance, a rebuild, and/or a new truck.)

 

You are on the right course.
Better than being tied to any company financially for equipment is to finance it on your own, so you can take it wherever you please if things do not work out. A lot of people don't have this kind of available lending to them, so they fall for the lease scams as you described and think they are Owner operators now.

 

I don't have any money or credit either. But at least I have the good sense not to get myself into a situation that will make it worse. Understanding these things is why the rich get richer and the poor get poorer. Swift is getting rich off of "owner" operators who don't know how to look at where the money is going. The right thing to do is have a little self discipline, patience, and cunning and start your business the right way at the right time.

 

Exactly

Want to make it even sicker?
Swift/etc can buy the truck for 40% less than an individual can due to volume sale. Then at the end of the lease they somehow want basicly what they paid for it in resale value. Buy it for 90k. Sell it to leaser for 150 + interest. And sell it for 60 or 70 at year 4 or 5. Why even bother with freight? Can make more doing these truck deals

 

That's how they can afford to treat their drivers like crap and crank through the revolving door of new drivers at the cyclic rate. That, and I have heard how their CDL school gets government grants in addition to the tuition people pay. It sounds to me like Swift is in the business of ripping people off. They just got bought out by a company a quarter their size. How embarrassing! This is what happens when you take your business off into forbidden paths. They are no longer a freight hauling company they are a government subsidized driving school and basically running a Ponzi scheme with these leases. Once you lose sight of your primary focus and begin trading in derivatives…Just like what happened before the housing crisis of 2008... you start ripening for destruction.

 

I'm assuming if a person bought this truck, he/she would be running under their own authority? The reason I assume this is because the established companies require independent contractors' trucks to be a certain year model or newer. Basically, you can't buy an old truck and lease it on with a big-ish company. And, from what I have read, trying to run under your own authority is not advisable for new owner operators?

Straighten me out here.

 

The deal with running under own authority works if you know what lanes pay what rates. Many people seem to draw up a plan where they figure their cost to be x per mile and they need to get y per mile. This works as far as averages go. That doesn't mean every load in every direction pays y. What happens for loads that pickup in one state where lots of outbound freight is and delivers to a state that has zero outbound. The inbound must obviously pay more. This is where the guy who figures he has it made getting y per mile can lose out.

Running under a company that promises z per mile and promises tons of miles may work for some. Percentage is a good way to determine what lanes pay what rates before stepping out on your own. When under a company they often cover fuel expense and do all the tax filings and billing and load finding in exchange for their cut. When on your own you are now responsible for all of that. The question for many is what is a fair cut to charge. Lots of guys are happy giving up x % to not have to worry about all the office expenses, and that works for them. And then some of us are so hard headed we can't be told otherwise and we do it all on our own. It is too complicated for each person's situation to just blanket say one way is better than the other.

 

I think my comment applies to you, you are taking the long way around an open barn.

If you don't have money or credit, start with what you should start with all the time >>> getting your CDL and getting on the road. Don't go down the path of getting into a lease purchase agreement, for the most part they rarely work out in the end.

Then after a year or two on the road and producing revenue, and with luck, you will be able to do two things - one is to know how this industry works and apply it to building a business (the reason for my comment is because many of the conventional thinking with business academics doesn't work in this business) and second to allow you to establish credit and save for a DP on a truck.

There are a few reasons I say this, the first and most important is that many owners are underfunded and cause issues for most of us by running cheap to pay bills. The second reason is that I've seen a lot of owners who failed, even under a LP program, most are mismanaging the revenue. Other reasons you will need to figure out.