Consider leasing now
With truck tonnage and spot-rate price decreases year over year, now may be a good time for both carriers and independent drivers to consider leasing. The business relationship can be mutually beneficial.
Why carriers want to lease on owner operators
Due to strong rates, since 2020 there have been hundreds of thousands of new trucking companies. The vast majority of these start-ups were independent drivers getting their own USDOT number and authority.
Leasing drivers and vehicles is a viable strategy to lighten an operation’s asset load. Many lease terms are negotiable, but often the leased driver or company is responsible for:
- Health insurance and coverage for the vehicle itself,
- Maintenance, and
- Fuel.
Passing these expenses to the leased vehicle can improve margins for a carrier.
Carriers do need to be careful to protect the independent contractor status of the leased driver or risk the government treating the driver as an employee. States, such as California, may consider any leased driver an employee.
Why drivers want to lease on to carriers
An owner operator spends much of their time sourcing freight to run on load boards and using freight brokers. Selecting a good paying load may put the truck in a back-haul market where available loads can be scarce and, when available, with low rates. Leasing on with an established carrier can provide a more reliable load source and either a sure rate per mile or revenue sharing system. In addition, the carrier takes care of billing, collection, and rate negotiation.
A leased driver runs on the carrier’s authority and USDOT number with the carrier being responsible for bodily injury and property damage coverage - one of the higher costs of operating a vehicle.
Drivers need to be sure that they understand all the terms of the lease, including exactly what the carrier and driver are each responsible for. As a contract, any agreed terms need to be included in writing in the lease.
Key to remember
Leasing has advantages for both the carrier and the owner operator. To be a long-term cooperative business partnership, both parties need to come to the table with a clear vision of what they hope to accomplish and an open ear to what is important to their partner.