Financing a Truck and My Experience

[Longshot]

A little over a month ago a family member (CDL) came to me needing some help.
The short of it was that he had engaged in a lease on a 2011 Freightshaker with a lease payment of $700+ per week (WOW! per week? is that possible?) and he wasn't making any money - the rate paid by his carrier - .90 per mile.
I asked for a copy of his most recent weekly carrier statement - upon reviewing I almost threw up all over myself.
By the time lease payment, fuel, insurance, escrow (to cover the carrier's insurance deductible in the event of an accident), elog rental, yadda yadda was taken out there was obviously nothing left.
Wait, why was the carrier paying the lease payment "EACH WEEK" $710? I called the leasing company and told them I wanted to renegotiate the lease - NOT A CHANCE. I told them my relative was leaving the carrier. Their response "he can't leave the carrier and keep the truck". HUH? What? If the lease is in his name then he should be a free agent right? NO!
The leasing company told me the carrier acts like a credit booster and additionally they have many drivers with leases at that carrier and they did not want to jeopardize their relationships with the carrier. At that point I smelled and industry wide scam going on with carriers and leasing companies colluding to rip off drivers.

My discovery was that there are some really really bad people out there and I concur with Rawze book completely - I do not know how they sleep at night.
I also found out that the reason for engaging in the horrific lease to begin with was because his previous lease had broken down and he did not have the $26K needed for the repair so he walked away from the truck and of course that negatively affected his credit.

That is when I decided to try and help and the only solution I could find was to buy a truck myself. BUT I wanted to do it right if I could figure out a way to do that.
I had some money I was willing to put down +- $6000.
I needed financing so I went searching for commercial truck financing and mostly the traditional ripoff artists - appalling. Most would only finance if you have a CDL for at least 2 years, I do not have a CDL, or have been an owner operator for 2 years, I also have not been and owner operator before. I have good credit and some money and they would not lend to me - WHAT? When I inquired why they would not lend to me I discovered the not so secret, very disturbing industry wide scam - quote "we lease to drivers directly who have poor credit or no credit or little driving history - that is our model and that is why we make high double digit interest rates". Some had interest rates higher that 50%. So I went to my local home town bank, the guys who lent me the money to buy my house, the mortgage I have already paid off. They know me and I know them. They have never loaned money for a big rig before. When I asked for a loan their response was "go pick out a truck". I agreed to put down $5000 and they agreed to lend me the $35000 for a total of $40k truck purchase (my budget) @ 7.25% interest - that's right 7.25%. When one of the rip off leasing companies called me back and I told them to piss off and that I already borrowed the money at automobile finance rates they literally threatened me and told me that if I borrowed money in that way that I was in violation of DOT laws. Really? So the DOT is now regulating how I borrow money for a truck?
I doubt it, but that is what they claimed and they said it in a very threatening kind of way.

Did I do it right? Well as truck financing goes I think I probably did quite well, but I have circumstances that are likely different from most drivers going the owner operator lease route.

As a result of this experience and my discoveries I will start a new business specifically targeted at helping drivers acquire a vehicle in a financially responsible way including buying a vehicle with a warranty so that they have some protection from catastrophic repair costs. It would also be nice to include some income replacement when the truck is out of service for more than 2 weeks. This also implies operating in a way that builds reserve that can be used for repairs, maintenance, and even low rolling resistance tires and other types efficient operating strategies discussed here on the AWESOME Rawze forum.

I have another post chronicling our first vehicle purchase - it is not without mistakes and bumps in the road so check it out if you want to see a real life startup from someone with no trucking experience.
Longshot

[Nilao]

I purchased mine with a 44k signature loan. Nothing down and $900 a month. My interest rate is also low but I have decent credit and have been a member of my credit union for over a decade and paid off 3 car loans with them. There is no law about where you get the money from....unless your laundering it for uncle Luigi.

[Rawze]

It sounds like he has a lot to learn.

Problem #1. Your family member was failing his second lease for likely the same reasons that 85% of all owner operators fail at truck ownership. $700/wk is not unreasonable for a new truck with low miles on a lease. Not the easiest thing, but it is definitely doable for someone who knows how to keep expenses and fuel costs to a minimum, mitigates downtime by doing their own repair work and saving costs. It sounds like though, they have no idea how to manage their major expenses like fuel and maintenance. $26k for a major repair is "WHAT IT COSTS SOMETIMES TO SO BUISNESS IN A BIG-RIG!!!" and if it puts you out of buisness and makes you fail your lease,.,.. YOU F%KED UP!!! --- YOU (I.E> your family member)!!! -- For not planning and being prepared for the high cost of repairs for this type of equipment, Not your leasing company.


Providing him with this nice truck and lower payments is NOt going to fix this for him, and you will pay the price for it in the long term, because now you will BOTH fail, and have a family falling out and hatred in the process. -- this is how i see your future, because you have one person who "couldn't make it", and could not manage their truck expenses TWICE, and another person who knows nothing whatsoever about what it takes to own and operate a truck, has never driven, and has no idea how to keep it profitable dishing out all the advice.

Call me a prick for saying this, but this is my first thought after reading such a lengthy post. hopefully i am wrong, and your family member is suddenly "wiser" with YOUR CREDIT AND MONEY than he/she was in the past, but I doubt it.

there are certianly bad leases out there, but people who fail at leasing trucks do so 90% of the time AT THEIR OWN PERIL!. They have this "I should hold the steering wheel and go as fast as i can to get as many miles as i can, the let someone else fix it when it stops working" attitude and that in itself IS THEIR DOWNFALL!.

Prime example,....

-- I met someone who said "they can't make it!" who is leased onto the SAME EXACT COMPANY I AM LEASED ONTO, making THE SAME EXACT PAY! -- and just like you said,.. They looked at their statements every week, and they run 3,000 miles+ solo and HAVE NOTHING LEFT OVER when all the expenses come out. They were dishing out $720/week in lease payments -- They are failing miserably, and are proclaiming EVERY PROBLEM they have on their bad deal. I went through the entire year worth of settlements with them, and it was THEY THEMSELVES Who pissed it all away and was completely broke by way of poor cost management and bad decision after bad decision, and the bit of money they did take home,.. was gone and they did not have 2 dimes to rub together.

I then took my settlements for that same year,.. Went through them and ADDED IN the $720/week, and STILL CAME OUT MAKING A DAMN GOOD PROFIT of more than $48,000 take home!!!. Not bad for someone that would also have been 1/3 closer to owning that $130,000 vehicle. Thats $48,000 in take home pay + another $43,000 in gained assets for the year.

I worked with the guy for a week here at the house and got him a pyro-boost gauges, showed him how to drive it for max effeciency instead of max miles, and showd him how to work on most things huimself,...

One year later,.. he was proclaimed THE MOST PROFITABLE SOLO TRUCK THAT FLEET HAD EVER SEEN!. and was asked to give seminars and suggestions on how he made it. -- when he did,.. ALL THE OTHER TRUCK OWNERS GAVE HIM THE SAME EXACT ATTITUDE BULL4HIT REPLIES AND ARGUMENTS THAT HE DID WHEN HE MET ME!.

Some people you just can;t teach,.. and others are just too damn stubborn to learn,.. and to "proud of themselves" to crawl under a truck at 3:am in the morning to find that broken wire or to replace that worn out sterring king pin in a truck parking lot because it has just failed. -- You know,.. THAT GUY who is driving at 55 mph and keeping it moving steady to make for the slower speeds instead of 68 or 70+,.. maximizing profit every mile of every day,... -- GETTING YOUR HANDS DIRTY, WORKING ON YOUR EQUIPMENT, STAYING OUT OF SHOPS AND KEEPING IT MOVING, AND MANAGING EVERY PENNY AND COST is what it takes to make it out here and if your family member is anything LESS,.. he will just fail again!.

My wife recently met an O/O who had been sitting for almost 3 DAMN WEEKS!!! in the T/A truckstop in L.A. because someone backed into him and slightly cracked one of his headlight assys. he said he was waiting for the insurasnce approval BECAUSE HE DID NOT HAVE THE $400 FOR A NEW ONE!. and they were giving him a hard time because the police did not make a report. this all while his lease payments and every other expense he had were getting behind. --- BAD BUISNESS DECISIONS!!!--- LOOSE $10,000 IN REVENUE FOR A GODDAMN $400 HEADLIGHT THAT ACTUALLY WAS ONLY CRACKED AND STILL WORKED! + HIGHER INSURANCE PREMIUMS? -- WHAT AN IDIOT!!! -- My wife had to walk off in dismay.

[Magard]

My thoughts on the family situation. Not every one is cut out to be a trucker. I mean owner operator. First of all you have to be a mechanic. I'm not the best but to be at the mercy of some shop. I'm sorry but 90% of them suck. Even the good ones charge more than you can afford. It's not there fault they have to make a living. I'm just saying that if I can drink beer work on a truck and make a $100 a hour I'm going to do it. If I'm doing something I'm new at I'll hold off on the drinking cause I don't want to cost myself money in screw ups. I've heard this attitude of it's my time and paying someone to do the work on there truck. Trucking is a 100% time consuming. Your self employed. Own it. Every hour spent fixing your truck is spent on yourself. It's a way of life. If you don't like it get a government job and bitch every day about life. Trucking is awesome if you like working for your self. A $26000 dollar repair is awful high. If I had a repair that high you could bet your ass I would be right in the middle of it trying to midigate the damage and learn how to avoid it in the future. I'm kinda ranting but I just get frustrated with people not taking initiative and becoming successful. Not saying anything bad on your situation particularly because I don't have actual facts just going off of a general assumption and gut feeling. I hope the best for you and yours.

[Waterloo]

I have to agree with the others here. Sounds like this family member would be better off as a driver, not an owner. Like Magard said, you have to be a mechanic amongst other things. I have spoken to more than a few of these lease ops... Hell, half of them don't even know what is under the hood! Talk general maintenance with them and watch their eyes glaze over. Most of these guys have no business in one of these lease deals, or truck ownership, as they have not got a clue of even the basics. Sad, but very true.

As far as truck loans, I have always gotten low interest loans through the dealers, under 10% with good terms, I have paid off a few. My other trucks, including the one I am currently driving I simply paid cash for.

[Fergie]

Ok guys help me out here, curiosity is killing me. With my line of work I don't have to deal with leases and don't know much about them. I've never been fond of car leases cause you pay all that money and at the end of the lease you have nothing to show for it, no asset. Dealerships love them cause it's obviously a money maker which to me is a big red flag. I feel the same way about these aftermarket warranties they always try selling. On a truck lease who's responsible for breakdown repairs? My opinion if I don't own that truck I'm not paying to fix it exception would be tires and brakes. $710 a week is $36920 a year, that'd buy that 2011 freightliner the first year and probably pay for licensing and insurance! Pulling for these big fleets do you have to lease a truck from them or can you say I've got my own truck? For that kind of money you could buy a new truck, five years have it paid for and under warranty. Then after 5 years you've an asset that could either be sold or keep running if it's a good truck. I'm sorry I'm very ignorant on this aspect and just trying to see why someone would do it.

[Waterloo]

Follow the money Fergie... I know one guy that went this lease route, he lost his ass in 6 months. He took the truck back and is now a company driver earning a living. Where he should have stayed.

The big attraction from what I can tell is the wages. But no one ever factors in the expenses. And these outfits will heap them upon you faster than Carter can spit out the Liver Pills. The only folks making money are the trucking company and the lease outfit. The driver is just a slave to be abused while teasing them with great rates and wages. Like a kitten and that laser pen. Everyone loves kitten videos. ;-)

[Longshot]

Thanks all for the inputs and I agree 100% that not all drivers should be owners and with most of the opinions and advice from all members mentioned here.
All of what Rawze stated about operating efficiency is true of my family member's methods like driving too fast and paying for repairs that could have easily been done with a couple tools in 15 minutes. Case in point; truck would not regen so I found on this forum information about diesel doser, so I went out to the truck unbolted the doser, totally caked over, would never regen, so I cleaned it up in about 15 minutes and it regens fine now, no issues. Family member said "wow, I paid $1000 to have that doser replaced on one of my trucks".
I found a Cummins document about how to get the best gas mileage and it covered most of what everyone has stated here and for sure most of those best practices were not being followed by my relative and I have mandated that going forward speed will be monitored and must be maintained at Cummins best practices guide - in top gear driven at whatever road speed equals 1400 RPM and preferably 1300 RPM but not more than 62 MPG as a normal practice.
I will monitor with a combination of Bluefire engine data collection and GPS data from Traccar which I have setup on my own server at Amazon.
Just to be clear, I did not buy a truck and turn it over to my family member, I will basically fulfill owner functions and he will drive and either meet my guidelines or I will put someone else in the rig who will.
We will follow a rigid maintenance regimen that includes routine replacement of parts at manufacturer recommended intervals. Thoughts on that one? What would you'all think of replacing NOX sensors at 200K miles for example?
All revenues come to my LLC bank account and I will hold out for repairs, maintenance, and investments like low rolling resistance tires, low flow air filter, bypass oil filter and maybe a Bully Dog unless this group thinks there is a more cost effective solution - Rawze mentioned Pyro Boost Gauges ?. Is that a good alternative? Sounds like it? Thoughts?

[Rawze]

(09-07-2017 )Fergie Wrote:  Ok guys help me out here, curiosity is killing me. With my line of work I don't have to deal with leases and don't know much about them. I've never been fond of car leases cause you pay all that money and at the end of the lease you have nothing to show for it, no asset. Dealerships love them cause it's obviously a money maker which to me is a big red flag. I feel the same way about these aftermarket warranties they always try selling. On a truck lease who's responsible for breakdown repairs? My opinion if I don't own that truck I'm not paying to fix it exception would be tires and brakes. $710 a week is $36920 a year, that'd buy that 2011 freightliner the first year and probably pay for licensing and insurance! Pulling for these big fleets do you have to lease a truck from them or can you say I've got my own truck? For that kind of money you could buy a new truck, five years have it paid for and under warranty. Then after 5 years you've an asset that could either be sold or keep running if it's a good truck. I'm sorry I'm very ignorant on this aspect and just trying to see why someone would do it.

Any decent truck lease lest you pay a baloon payment at the end for the title. You do gain asset because of this.

The responsibility of ALL the maintenance is up to the O/O and NOt the leasing company!. they almost all take out money for "maintenance fund" but that is NOT what one should be using for "Maintenance" or even repairs for that matter.... This is where 99.9% of all failed lease operators do and argue about it like a bunch of idiots. You should be using YOUR OWN MONEY!!! for all maint and repairs and letting that "Bullshit(maint) fund" build up so that it will cover that balloon payment at the end. -- Period!.

There are 19 things listed in my book that EVERY SINGLE PERSON who is considering leasing a truck should avoid at all costs. After that, it is all up to YOU to make it work and be profitable, and to keep the truck on the roads, and if there is no chance of you getting the titel at the end -- DON'T BOTHER TO LEASE IT!!! -- STAY A COMPANY DRIVER!!! because it is that ASSET that makes it worth it in the end and nothing more.