So You Want To Be An Owner Operator

Let me start by saying this article is meant to help you make an informed decision, not to discourage you or rain on your parade.

There is a certain prestige to owning your own truck but over the last few years the term Owner Operator (O/O for short) has taken on a false meaning for some. An Owner Operator may still be making payments on their truck, but they are free to do as they wish with the truck. Want to change companies - no problem. Put in a custom interior - go for it. Paint it purple with orange polka dots - yuck, but it’s your decision.

Then, there are people with a false sense of ownership. The reality is they are not true O/O. They are Lease/Purchase Drivers. There is a world of difference between the two and unfortunately if you don’t know the difference before you sign on the dotted line, you are going to pay thousands (yes, thousands) of dollars out of your pocket with no benefit to you. Let’s cover some of those differences and I will show you where your money is going and who is getting it because it’s not you.

Many trucking companies advertise that you can own your own truck with little or no money down and no credit check. Sounds great so far huh? Let’s see how much that truck is going to cost you. I am going to use averages here based on numbers I am familiar with from 3 different companies.

Let’s start with the money an O/O I know pays out for his truck. After adding everything together - truck payment, plates, permits, insurance, occupational insurance, pre-pass, trip submission fees - the total spent per year is $18,773. You could break that down per week, but as a true O/O, once certain things are paid, they drop off the weekly deductions, such as plates and permits and your truck payment is monthly giving you the ability to take time off if you want. There was an additional $500 paid in the first year with his company to cover what is called escrow (to offset any bills you may leave the company with if you go elsewhere). Now, I will grant you that this is a used truck but the cost of this truck at time of purchase was still equivalent to the cost of the trucks you are going to find at lease purchase companies. The difference here is he is paying the actual price - by the time the guy who got suckered into a company lease pays off his truck he will have paid up to 3 times more for his truck.

Those companies I am familiar with - their charges average between $750 and $850 per week for everything (except fuel) - except they also charge you up to a .10 cent per mile fee for a maintenance fund. Let’s say you drive 2500 miles a week (this is for illustrative purposes) times the .10 comes up to an extra $250 per week - money that you will never see unless your truck needs repairs. That’s $13,000 a year that you aren’t going to see and probably won’t use unless you blow your engine. On top of that, it’s not your maintenance fund - it’s a group fund. When (if) you complete your lease, that money is gone. Even my worst truck that broke down every time I turned around cost less than $10,000 in maintenance and repairs in it’s last year. If we go right down the middle on the payments, you are going to pay out $41,600 a year for the truck. Oh yeah, that covers everything else.

Just what is “everything” else. All those things listed for what that O/O pays. Except when he pays off his plates, they drop off his weekly deductions - same with permits. His company charges $200 per year for permits at $11 a week and plates run $1685 a year at $55 a week - so, after 18 weeks the $11 stops and after 31 weeks the $55 stops. Nothing stops with the company sponsored lease program - so where’s that money going? The company gets it and it just becomes the cost of doing a lease purchase.

Another thing bad about signing on with one of these programs is the weekly payments. If your truck costs you $800 a week what does that mean if you take a week off? It means that when you come back you are starting out $800 in the hole so when you finish your week of running the first thing coming out of that check is $1600 - $800 from your week off and $800 from your week back. Your payments don’t stop they just keep adding up putting you further and further behind. The company doesn’t have to push you to drive and run hard - you have run your butt off just to keep up with your truck payments.

Once you start breaking it down you can see a huge difference. Over a 4 year period (the example O/O loan period) our O/O has paid $55,200 in truck payments (even adding in the down payment he still only paid $59,000) and $21,180 in operational costs (not counting fuel or repairs). Our lease purchase guy has paid $153,600 for everything (except fuel). See where that 3 times as much comes in now?

On top of all that money spent you still have to consider that as an O/O you are paying for fuel as well. Still using the 3500 miles per week and 7 miles to the gallon (this fluctuates a lot but lets just say your not going over any mountains with heavy loads) and $3.90 a gallon for fuel. Your fuel costs are going to run $1950 per week on the low end.

O/O also have to pay for any repairs and maintenance. Our lease purchase guy has his maintenance fund to fall back on (that $18,200 a year figure). Most O/O will put back money for this, but it’s their decision how much - and whatever is left at the end of the year can just roll over to the next. The point is, it’s their money, they keep it. It doesn’t go into a company fund that you will never get back if you don’t use it.

These companies have packaged up these programs, put a bow on them and told you that you will be an Owner Op. This is so distorted. You are not - I repeat NOT - an Owner Op. Tell them you are taking your truck and switching companies and see what happens. It’s still their truck! You can leave the company but the truck is going to stay right where it is with you or without you - no matter how much you’ve paid, if it’s not paid off, you’re not taking it. If it’s their truck, how can it be yours? You can’t change it or modify it in any way and you sure as heck can’t remove the governor. You can’t do anything they say you can’t. The whole point of being an O/O is the ability and freedom to do what you want with your truck.

I am not trying to discourage you from getting your own truck. I am trying to save you some $$. There are always those company guys out there that say the O/O is going the way of the dinosaur. Wrong! The trucking industry is composed of 87% O/O. There is one company alone with 8,500 O/O on board - and that’s just one.

If you have to go with a lease program to get a truck, that’s fine. Just don’t do it with a trucking company. Save up a down payment and find a leasing company - they do exist. You may end up paying $60,000 for a $52,000 truck but that’s better than paying $150,000 for a $50,000 or less truck.

I could go on and on about what a rip off this is, but I won’t. I just hope that if you are trying to purchase your own truck you will go into it with a little more of an understanding on these programs so you don’t get taken advantage of as bad. Before you get your own truck there is a formula you need to fully understand so you know how much money you need per mile just to cover the basics. This is a proven formula and the biggest O/O company out there uses it as well (they go even more in depth with it, but I am using the short version that I always have).

This is based on 10,000 miles per month. Figure how much you need to cover expenses per month - this includes truck payment, all insurances, plates, permits, trip pak fees, prepass and any other fees you pay out to run your truck - our example guy needs $1565 a month. Now we will figure fuel costs and we are going to use numbers here to reflect fluctuating fuel prices, heavy loads and possible mountain crossings (all factors that affect mileage). 10,000 miles at 5.5 miles per gallon x $3.90 (fuel cost per gallon) = $7090.90 in fuel for the month. So we have expenses of $1565 and $7091 per month just to run the truck so how much do we need per mile? Our total is $8656 - divided by 10000 miles = .8656, so you need to make .87 cents per mile just to pay for truck and fuel. Now anything over that is yours - so if your load pays $2.10 a mile on 750 miles ($1575) and as an O/O you get 67% you are actually getting $1055.25 which is $1.407 per mile. Now take out your .87 cents per mile and you have .537 or .54 cents per mile rounded up. That’s your money for bills and whatever else.

You need to understand this. When you hear a load pays $2.10 a mile you may think that’s not too bad, but you need to know how to break it down to see the real profit. Don’t fall for that “if the wheels ain’t turnin’ you ain’t earnin’” line - it’s crap. You will not make money if your load only pays .86 cpm to the truck - you are paying them .01 cent per mile to haul that load, no matter how much the wheels turn.