In case you missed it, the trucking industry is booming across the country right now.
But even with rates at or near-historic levels, there is still more freight than truckers. That means BIG opportunity for those wanting to become truck drivers.
Truck drivers are usually divided into two camps – leased-on and owner-operators.
A leased-on driver works for a trucking company and drives the company’s trucks. Owner-operators drive their own trucks.
Let’s assume you’re wanting to take on the challenges of running your own operation. Do you lease the truck or buy it? The answer, like most things, is … it depends. It also depends on whom you ask. One trucker will tell you leasing is the easiest, simplest way to run your trucking business. Another will tell you that owning your truck is the only way to be successful.
Either way, it’s important to educate yourself on the differences between the two before deciding to lease or buy.
What is a lease?
If you’ve ever purchased a car, you no doubt have had to decide whether to finance or lease the vehicle.
Financing a vehicle is about making payments on the actual vehicle, a lease is not about the vehicle but about the use of the vehicle. This includes the depreciation of the vehicle’s value during the lease term, as well as maintenance and repairs.
Leasing a big rig
The two most common options with big rigs is to either finance or buy a truck through a loan or with cash, or to lease a big rig usually from a trucking company. Some trucking companies will allow a driver to buy the leased truck from the company, but there are often stipulations that may limit your options as a driver.
One of the benefits of a lease is that the payments are often lower than with financing. This can be valuable if you are looking to build your own trucking business, and you are low on cash. Another advantage of a lease is that most of the maintenance and repairs are covered in the lease payments, which means that there are no additional expenses out of your pocket for maintenance or repairs on your rig, at least during the term of the lease.
Perhaps the biggest difference between a lease and a purchase comes at the end of the term of the lease or the financing. At the end of the lease term, the truck can be purchased (after negotiating a buyout with the leaser), or the truck can be traded in for another model with similar lease terms.
Even if you honor the terms of the lease, you don’t own the truck, whereas you own the rig at the end of a financing term.
Buying a big rig
There is a lot of independence that can be gained from buying a big rig instead of leasing. When you own your own truck, you can dictate your own workload, and you can modify the truck to suit your needs, especially for the long, over-the-road hauls.
At the end of the financing term, the driver will own the rig outright. However, often the payments on the financing contract are higher than on a lease, and any maintenance and repairs come out of the driver’s pocket. Over the long term, a driver may come out ahead financially. The key is to maintain the necessary cash flow to stay on top of the payments.
Buying a truck also means that you gain equity as you make each loan payment and/or supply a sizable down payment. Equity can be used to grow your driving business, either allowing you to hire more drivers or to perhaps get new trucks to build a fleet.
The Bottom Line
You have options as a truck driver, and there are benefits and drawbacks to leasing and buying your own truck. Before making any decision, it is important to understand your goals and your financial situation to determine what makes sense for your trucking company.
Whether you lease or buy, both require steady cash flow in order to keep your operation running. Check out FreeFreightSearch.com (FFS) for a comprehensive load board, that allows you to put your investment to use as quickly as possible. It’s simple – find a load, get a fuel advance, get funded within hours not days.