Lease Vs. Buy

[cxn613]

I was wondering with the new technology and wondering "what if my trucks lets me sit", is it any easier to lease a truck through someone like Ryder or Penske? That way when it lets you sit they take care of getting you a loaner truck and they fix your truck. Now im sure it costs a little more to be in a full service lease, but I guess you have a little more piece of mind of knowing someone is there to back you? Is there anyone out there that has been in a lease program or anybody with any opinions about this? thanks in advance

[usmcjimbo]

Worked for Rollins Truck Leasing and then Penske Truck Leasing for about 6 years. Normally full service truck leasing is done by companies who need trucks, but don't want to be in the truck ownership and maintenance business. It can be expensive with both a monthly fixed charge plus a mileage charge. Your rate will be based upon how many miles you run per year and the length of the term and they will adjust both of those yearly based upon how many miles you actually run. If you run irregular routes and pick up a loaner it is up to you to get back to pick up your lease vehicle. Once your lease vehicle is repaired you must pick it up or they will start billing you for both the loaner and the lease truck.

The biggest fishhook in the bucket is the schedule A value. If you terminate the lease then you must buy the truck at the schedule A value which can be very expensive. Also you will need excellent credit - they generally will not rent or lease to owner operators.

An alternative is to go with a contract maintenance package. You can either select a 0 peg contract where you pay a monthly fee plus an hourly charge for repairs and about a 30% markup on parts and supplies or a guarenteed program where you again pay a fixed and mileage charge every month.

I would caution you to be very careful. These deals have major penalties if you try to get out of these contracts and they are not by any means the cheapest way to own or operate trucks. They do remove all of the uncertainty and much of the headaches, but at a very hefty price.

I would suggest using a quality national breakdown service - many have loaner truck programs through national rental companies at better rates then what you can get by yourself.

I beleive OOIDA also has many programs like this for owner operators as well.

Review and research all options available. Good Luck

[convoyduel]

The leasing plans from the major outlets such as Penske and Ryder are targeted to companies that have trucks which are incidental to their primary business. In other words, they make a product or provide a service that requires them to provide transportation as a package deal. The very high cost of these leases are rolled into the price of their service or product. Leasing the trucks (and typically a full service lease at that) allows the company to focus on its core business but also allows them to not have to worry about a revolving door of carriers or one-time-thru owner operators that have a learning curve on each haul. In the case of smaller fleets, the cost of having a safety manager and maintaining DOT paperwork in-house often exceeds the cost of just farming out the DOT work as part of a comprehensive lease. Maintaining a few driver logs is easier than IFTA, IRP, DOT inspections and the rest of the regs dealing specifically with vehicles.

For trucking companies, especially small operations, there isn't anywhere near enough profit in a load or the market to offset the increased cost of a lease, especially a full-service lease. A new truck might cost around $1500 per month. A lease, will cost around $1800 or more plus another mileage charge that totals $400+ per month. Add to that, routine wearables like tires and brakes and you're looking at a huge chunk of change.

The local Mack dealer in St. Louis (F&C) has an in-house rental and leasing service. Their rates are extremely fair, but even as thinned down as they are, the dollars still work out in favor of ownership on every level. We used them on a short term lease (long term rental really) and it worked pretty well for seasonal work. They also really had the market pegged with their trucks as most of them had single line wet kits already installed. Using their rentals was a great way to keep the customer happy and keep out competition cashing in on an unforeseen maintenance break down. Rental rates often left no profit whatsoever, but it kept a driver paid, keep revenue flowing and others out.

There are also leases (usually called TRAC leases) with a super low buyout ($1 or similar) that are developed for tax purposes that payoff like a loan but are leases in name only. In some cases, $1 TRAC leases may not always be 100% deductable, depending on laws and regs.

A big "gotcha" in leases for small operations or individuals is that transitioning from a financed vehicle to a lease can often lead to unusually low lease payments on the FIRST lease. The equity in an owned or financed vehicle, when traded in, is applied against the total lease value, making the $ value leased lower than if no trade or down payment were made. At the end of the lease, there is no value in the vehicle to the customer (lessee) and the owner (lessor) takes the vehicle back. The customer wants to lease again, but this time, they probably didn't save any money for a down payment and they have no value in the lease vehicle they just turned in, so their cost basis for the new lease vehicle is full value, resulting in much higher payments.

Tax laws allow the entire incurred cost of the lease to be expensed as it is payed out. In other words, if in a calendar year, you spend $18,000 on lease payments and an additional $6000 on mileage expenses on the lease and bought a $3000 set of tires, your books will show a $27,000 expense against income (revenue). For that same truck purchased using conventional financing, assume you paid out $18,000 in loan payments. You also bought the same $3000 set of tires. At the end of the year, you can show $3000 worth of expense for tires, dollar for dollar expenses of any parts or service paid for on the truck that year and that's it. The cost of your truck is expensed through depreciation. Where it really gets complicated is that the depreciation can be linear (same amount each year) or accelerated (more up front then the balance in equal sums). If your operation already has a net loss before depreciation (you spent more than you earned), you often cannot take any depreciation. There are rules that prevent a company from using depreciation to "further a loss". In that case, you may never be able to depreciate the truck. This is especially critical if you are using an LLC or Subchapter S corporation to pass profit or losses over to your personal tax return. You would need to talk to a CPA or tax attorney to find out how each case could specifically impact your operation.

[Freightrain]

Our company tried to rent a tractor for just one day, I needed to haul some large machinery to the local scrap yard(borrowed friends trailer). They wanted $5000 up front down payment, though the rental was just like $200/day(pretty cheap what ever it was). I ran it all day around town and hardly moved the fuel gauge(didn't put fuel in it). Dropped it back off and we got our deposit back in couple days. It was like pulling teeth as they really didn't want to do the deal, but the kid I'd been dealing with pulled it through as he had been trying to rent me straight trucks for years.

They want to deal with big corps, not little guys.

[RowdyRebel]

Just don't lease/buy a truck from the company you work for...otherwise you may end up like these guys:

Ex-Arrow drivers with lease-purchases fight to keep trucks

January 8, 2010

In the three weeks since Arrow Trucking completely shuttered its doors, former drivers who had lease-purchase agreements are still attempting to pick up the pieces, despite having zero access to desperately needed information the company has regarding their escrow accounts and the financial records on their trucks.

Former Arrow driver Kenneth Goodemoot of Barton City, MI, had just seven months left before his truck was paid off. He said he isn’t alone and that there are approximately 47 other drivers like him who are in the process of negotiating to keep their trucks.

And John R. Bagileo, a Washington, DC-based attorney who has more than 43 years’ experience in transportation law, said it could be in these drivers’ best interests to negotiate with the finance companies because they have so much equity invested in these trucks.

“If that driver has an equitable interest in that truck to the extent that he has been making payments and he has been in the process of purchasing that truck to one degree or another, I think he has a right to protect his interest in that vehicle and not simply to turn in the vehicle and thereby lose any equity he has in it,” Bagileo told Land Line and Land Line Now.

Bill Pelham of Phenix City, AL, is another one who had a lease-purchase agreement with Arrow. Until the company abruptly suspended operations, Pelham said he was just a few payments shy of having his 2005 Freightliner paid off.

However, that’s all changed for him now.

In fact, Pelham told Land Line he had already paid in nearly $97,000 toward “truck ownership.” While he is working with the finance company, Daimler Financial, to negotiate terms to keep his truck, he said Daimler admitted they don’t have any payment records on him.

“I was told that they didn’t have any record of me making payments toward this truck and that Arrow basically defaulted on paying on any of their trucks,” Pelham said.“So while they said they wanted to work with me, it was definitely going to cost me more than what I showed that I owed on my truck.”

“My records show that I only owed $630 before it was mine,” he said.

OOIDA Member Robert Anderson of Laredo, TX, is another driver who had a lease-purchase agreement with Arrow. He had paid in more than $50,000 toward ownership of his truck. He told Land Line he had just renewed his lease agreement with Arrow on Dec. 16, 2009, six days before the company shut down.

“They couldn’t wait to get me in to renew my lease, but they had to know this was coming to an end,” he said.

Anderson said the finance company has been hesitant to share any details surrounding his truck because they had only dealt with Arrow previously and had no record of him having a lease-purchase arrangement with the now defunct company.

“The finance company (Daimler) told me that I had to get with Arrow if I wanted to know the details and get them to open up their books and find out what’s going on and where my money went that they were taking out for payments on my truck,” he said. “I told them, ‘good luck finding them.’ ”

On Friday, Pelham, Anderson and Goodemoot were all still waiting to receive written contracts with the final finance terms on their trucks from Daimler.

However, Bagileo said there may be grim news for these drivers who had escrow accounts with Arrow because they will more than likely never see that money when or if the company files for bankruptcy. As of Friday, Jan. 8, that still hadn’t happened.

“I would doubt seriously if those accounts existed anymore,” he said. “Probably those assets were used in areas other than what they should have been used as the company was struggling financially. I don’t know that for a fact, but I think that is an assumption one could make.”

– By Clarissa Kell-Holland, staff writer

[Gambi80]

Just gonna take a blind shot in the dark here and say those guys are....phucked, bad.

I know little to nothing about lease/purchase programs but enough to read between the lines in that article.

[Double L]

I do know with most of these lease purchase agreements you NEVER get to own the truck, simply put when you get the truck paid off they pretty much put you in a new truck and start over again granted if you can get the miles to make it work. I hear most companies (CR England) who sucker driver's into a lease purchase agreement and they starve them for miles and force them into debt and make them turn the truck in. Hell I heard of one husband/wife team with CR England who was terminated because they wouldn't sign up to do a lease purchase agreement. All a lease purchase program is nothing more than a glorified company driver. That is why they tell you never lease a truck from the person who signs your paycheck. But yeah those guys who leased Freightliner's through Arrow are screwed big time.

[RowdyRebel]

Just gonna take a blind shot in the dark here and say those guys are....phucked, bad.

I know little to nothing about lease/purchase programs but enough to read between the lines in that article.

Yup. The way I figure, if you don't have enough for a down payment, you probably can't afford the truck to begin with. If your credit is bad enough that you can't get a bank loan, you probably can't manage your money well enough to make it in your own truck.

Financially, I'm no better off owning my own truck than I was as a company driver. If anything, it's WORSE...worse because where I USED to be able to splurge and buy something nice when I had a little money saved up in the bank, now I pass on that something nice because the next breakdown may be only hours away and could take every cent I have in the bank (and then some) to get me back up and running. If I just spent $1500 on a big screen plasma HDTV, I may not be able to fix the truck...and if I can't fix the truck, I can't make money....and if I can't make money, I can't pay my bills....and if I can't pay the bills, I lose the house & the truck.

Not to mention, with the depreciation you get to write off the first couple years you have the truck, your tax filings don't look like you made all that much money which gets me to my LATEST problem....even with a credit score in the mid 700's, I can't get a loan to refinance my current 1st & 2nd mortgages because I "don't make enough" Never mind the fact that with the two loans wrapped up into one with a lower interest rate to boot, stretched out to 30 years (which only adds a 1-1/2 years to the 2nd and 3 years to the 1st), the payment will be CONSIDERABLY LESS than what I've BEEN making. I'm not asking for EXTRA money...just refinancing the loans I've already got.

The 2nd mortgage was taken when I bought the truck. I couldn't see paying 7% interest on money I had in the bank earning 1%, so I just paid extra on the house every month building equity...then I refinanced at 6%....then I took the equity back out of the house with the 2nd to make my down payment....but the 2nd is at 10% Was TRYING to refinance @ 5%. Oh well. I'll be getting married this year (hopefully.....if she ever gets her butt up here), and as soon as that happens I'll refinance & include her income...but I ain't gonna have her "cosign" the loan 'til after we get hitched. I ain't dumb enough to put her name on ANYTHING (bank accounts, property titles/deeds. etc) until she's got my last name.

[Double L]

I ain't dumb enough to put her name on ANYTHING (bank accounts, property titles/deeds. etc) until she's got my last name.

That is where a lot of people make their mistake!

[Gambi80]

Sounds like you need to vote some more democrats in to take the rich peoples' money and give it to you.

Since the gov't pissed away all that TARP money and bailouts and so on...AND since I just took a hit off the imaginary crack pipe...too bad they couldn't have just divided up that trillion dollars evenly amongst EVERY TAX PAYER...must be legal, working, paying taxes and verifiable proof that there are absolutely no illicit addictions (drugs, gambling). I heard one figure thrown out there that it would've amounted to about $100,000 per person. You could've paid off most of your house and truck and then been able to make more, spend more on crap to really stimulate more that just what's in your woman's underpants.

At any rate, my truck will be paid for in less than a year, so I'm happy I guess. The bank knocked off 1/4% of the interest rate for direct withdrawl (if I knew what that was I wouldn't have kids!...nyuk nyuk).

But at any rate....You have a Mack truck, your repair fund should consist of only the occassional light bulb and windshield wiper.

[Double L]

But at any rate....You have a Mack truck, your repair fund should consist of only the occassional light bulb and windshield wiper.

You forgot he has Ford's as well. We all know you put more into a Ford in a year than you do a Mack. I couldn't resist the urge to poke fun. Man I miss my old Ford more and more every day.

[Gambi80]

You forgot he has Ford's as well. We all know you put more into a Ford in a year than you do a Mack. I couldn't resist the urge to poke fun. Man I miss my old Ford more and more every day.

Ahh shit...I forgot he had Fords. THAT repair fund is cleverly disguised at the Mack repair fund. Found On Road Dead.

[RowdyRebel]

Ahh shit...I forgot he had Fords. THAT repair fund is cleverly disguised at the Mack repair fund. Found On Road Dead.

I've had my '92 Ranger for over 3 years....ain't spent a dime in repairs above and beyond an oil change once a year. I've had my '96 F250 for over 5 years, and abart from ball joints & wheel bearings, ain't had any trouble with it either....'cept for the cruise control, which I put off fixin' for over a year because I was skeerd it'd be expensive. Turned out to be a $20 part that took less than a minute to change. Oh yeah...battery & alternator too. Certainly nothing out-of-the-ordinary for a truck that was nearly 10 years old & had over 150K miles on it when I bought it....

....'specially when ya drive it like I do First summer I had it, went out to Montana....& while out there, we went shooting. To get to where we was gonna shoot, we went down this rutted up muddy road...ruts so deep I was bottoming out on the way out there following my uncle (slow). My uncle had to leave early to go play golf, so me and my brother (just back from Iraq) stuck around to fire off a few more rounds before heading back. Ran that same road outta there at 70+ mph & had my brother clenching the seat belt giggling like a little school girl On another occasion, I got in trouble with the woman.....ran through the truck wash (creek) at 50 mph without first rolling up her window Then there was the time I was towing the 60 year old trailer and the coupler came apart...75 mph down the interstate and the trailer was whipping back and forth by the safety chains. Damn trailer rear-ended the truck when I stopped & busted the exhaust peed bumps? If they wanted ya ta slow down fer 'em, they'd call 'em "slow down bumps" I could go on, but I gots ta get to bed. It's a truck. I drive it like a truck....anywhere, any time, full throttle all the way.

[Gambi80]

When in doubt, tach it out.