Your thoughts on a lease program

Ok a few things here. Just opinions tahts all. If your depending on 7.2 mpg for your paycheck. Your doing it wrong. 5-6 is average.


Now Bill. I have spoke with you a few times on the phone. Your a real smart dude. You know that this in the long run is not gonna be healthy. No matter how well you screen someone. No matter how well you think you can train a person, there will always be failure. Failure may reflect on your company. Especially, when someones whole life is destroyed because of it.Most guys that I know that have lost their trucks have also lost cars and houses. And if I read one of your posts correctly you say that if the one guy takes off or whatever, you make sure he gets a good load to get back up on his feet. Sooooo, some poor O/O that has his stuff together gets the shaft on a oad because this guy decided to be in a lease program and wanted time off? Thats kind of how I would take that. Just some food for thought.

 

I depend on gross pay - expenses to make my paycheck. I don't know what kind of math you use. And I have to be interested in anything that can add to that number whether it is mileage rate, fuel mileage, maintenance, or anything else. It's kind of like a business.

 

you say you would have zero exposure? meaning risk? anytime you affiliate yourself with some one or something that goes awry, you will always have your reputation scrutinized. if a lease operator does not make it, I would not like that person to blame you or your co. your name is always at risk every time you make a decision. but that's life. I referred your co to friend because of all the good I read on here about you & your co. if I heard about you on ripoff reports & not here, I would of not mentioned you or your co. whatever you choose, I am sure you can make it work out... eventually.

 

A business???? You don't say.... I guess I was unclear on my statement then. So lets see. Run out and buy a new truck because of 2 mpg? I guess you should figure your numbers on 5 which is average. And anything above that is a bonus? See, you only discussed the Truck cost. Not everything that goes along witha new truck. Such as higher insurance.

 

One thing I see with this is you are going to be the one taking the lease payment out of the contractors settlement. What happens when things start getting tight for the contractor and they don't have enough money left over to make things float at home with other debt? They will likely get pissed off and get on some internet forum and start bad mouthing your company because every time he turns around you have your hands in his pocket for lease payments, insurance, tags, etc, etc. Just something for you to think about, I am not against anyone leasing equipment versus buying if the numbers are in their favor, but there are companies out there that don't need the carrier to get involved with collecting their lease payments. If you need to know a good company to lease equipment thru, send me a pm.

 

Bill, given your responses and having chatted with you in the past, I think you're taking the right approach. I think one key component to your program above needs to be cash flow management. If you're teaching true accrual based accounting for a P&L and BS, people can get in trouble quick if they don't understand cash flow. Most o/o's I assume are doing cash based accounting so their P&L is their statement of cash flows. Getting the drivers to understand the lengthy timing of A/R and the short timing of A/P and what reserves mean to their success seems like the most critical component.

One additional though is the difference between good debt and bad debt. In simple form, bad debt, as I'm sure you know, is consumer credit. Good debt is part of a proper capital structure. If your drivers were to put 50% down as someone mentioned, that may over burden them to where their cash reserves are too thin to weather an uptick in their A/R and DSO. For example, going with less down and carry a bit more on the note may put them in a stronger cash position. Operating capital is the lifeblood. You don't want them to have to resort to factoring or seeking fuel/load advances from you as in the long run, their chances of success decrease with it.

I know I'm not telling you anything new, just mentioning what I think is learned the hard way by too many. As for the comment about the 5-6 MPG versus the 7.2... once we changed our company policies from drivers having the freedom to hammer down to 6.5 MPG or better, it raised our net margin 6 points and started making a huge difference. I'm all for it.

BTW, if Abel hasn't spoken to you yet, we started getting loads again. I don't have my Pete on the road yet while I replace all the air lines, etc. so if you know anyone or you guys can cover western 11 from time to time, that would be great. I told Abel to give you the Chicago to L.A. if you want it and approved full rate for it too.

 

Just my two cents..... but I think you're going to get more headaches than it's worth.... While you may not have a true financial stake in the endeavor in the way of liability for payment to the leasing company, you do have a big stake in the success of the potential o/o, as you are facilitating and possibly encouraging their entrance into being a business owner... A lot of company drivers pine for the day when they'll be an o/o, they dream about owning a truck, but the reality is, is that very few are actually capable and have enough self discipline to actually do it, business smarts notwithstanding....I'll just say this, when I bought my truck the finance people were very clear in what they thought my chances of success were... and they were almost right, the first outfit I leased onto were pure scammers... I survived, but it was hard work, smarts, and some really good fortune... I would be very careful about doing this, jmho. I will say this much, your model allows the independent to be just that, independent, if they fail to negotiate and secure good paying freight they will have no one to blame but themselves... but seriously, how many o/o candidates are really ready to take on this challenge??

 

If you were providing them with customer freight that would be one thing, but if they're going to be working broker load boards as brand newbies.... personally I think you're throwing them to the wolves... not trying to be harsh, just realistic.

 

"I told Abel to give you the Chicago to L.A. if you want it and approved full rate for it too."

And everyone just got extremely interested in just what that rate is......lol

 

Also if a truck turns out to be a lemon, can a person afford to sit a week and a half, paying a motel bill while broke down, with a shop doing warranty work and not worrying about how long it is taking. That had happened to husband 3 times with a 2013 International. The one shop he went to even had taken in a couple of trucks to work on after he got there that were cash paying.