Buying or Leasing a truck of is always a question for all trucking companies. Trucking industry is an economic giant in the United States that accounts for 5% of U.S. annual GDP and 85% of all goods transferred within the U.S. For that reason, trucking is a vital business in an economy that is heavily reliant on transportation services. Every day, ordinary Americans use the goods and products that are transferred to their homes and workplaces by trucks.
Due to the changes in people’s lives, there have been more loads than ever that have led to shipping tonnage of historic levels. Over the last 10 years, the trucking industry grew significantly and it is projected that tonnage of carried goods will increase 75% by 2025.
The rapid anticipated growth of the trucking industry has led to more people being willing to enter the trucking business as a drivers or as a company owners. Because of the sharp increase in the number of trucks on the roads over the last 10 years, the wait times to acquire vehicles have significantly increased as well.
It can take at least 3 months to buy a new truck and up to 12 months to buy a new trailer, a demonstration of the current growth and expansion of the trucking industry.
The high number of business people entering this industry has led to an average decrease in prices. Average prices of carrying loads per mile are down and the profit margins are at a historic low. Despite there being fewer barriers to enter the trucking business, it has become increasingly difficult to stay in the trucking business.
This book aims to help those who are entering the trucking business sustain their businesses. It also seeks to help those who are current business owners learn new ideas and solutions to expand their businesses to new horizons.
In these challenging economic times, it is more important than ever to maximize your current resources. At the completion of this book, the reader will have know how to achieve the ultimate goal of being a leader in the trucking business.
Get New Trucks No Matter is it Finance or Lease
Reliable trucks are a vital part of any trucking company. I have had experiences in operating a fleet of 100 Class A trucks and in managing a fleet of 15 trucks. I have also utilized used trucks in order to increase my overall number trucks in hopes that it would lead to greater profit.
You may think that by having as many trucks as possible, whether new and used, that your profits would increase, but this is generally not the case. If you have a large fleet of 100 trucks where most of them are used and in poor condition, I guarantee that you will make more with 15 brand new trucks.
After learning this lesson the hard and expensive way, my company switched to all brand new trucks and learned some lessons in that arena as well. Neither option is perfect, but you can use the best features of both options and experience positive results. Both worlds of leasing trucks and financing (buying) them have advantages and disadvantages.
What worked best for me may not work best for everyone, but my solution was the most cost effective in my experience. We learned these important lessons on our path to becoming a profitable company:
Leasing
Definitely a great choice. You will have a relatively standard monthly payment, the ability to easily estimate your cash flow, and the capacity to plan for investment expansion and the management of overall company finances.
Another benefit is that you have a maintenance and warranty plan included in your monthly payment, so despite having a brand new truck, you have the assurance that any possible repair or maintenance needs will be covered by your monthly payment. Knowing that these potential costs will not an added expense allows you to focus on finding better loads and getting more cents out of every dollar you earn.
If something goes wrong and you need your truck repaired, simply drive the truck to one of a hundred repair shops and they will usually fix it within a few hours. If they are unable to meet that timeframe, they will give you a new truck so that you can continue your driving. It is the same process for scheduled maintenance and unexpected road failures.
Financing
Another great choice. You also get a new truck and would not have the concerns of using a used truck. One major difference with leasing is that if you want to have the same repair and maintenance coverage, it often is not possible or it is only available if you pay a lot extra.
Financing is a viable option, and for higher monthly payments, you will have similar terms to leasing. Another factor to keep in mind is that you can depreciate a certain
amount for every year of any truck you buy, and you can use it as a tax exemption, which could ultimately save you up to tens of thousands of dollars annually.
Conclusion
A mixed combination of leasing and financing has worked best for my business. Once we switched to new trucks leased and financed, our trucking business exploded and started rising. We are thrilled that we have been able to make more money doing the same job.
There were no expensive repairs, on the road failures or expensive towing needed — we were simply focused on driving and getting more loads. Our drivers were happy because they were driving new trucks. We were happy because we were able to attract more drivers to the company, becoming an employer of choice.
Our method was to lease 70% and finance 30% of our trucks in order to obtain tax exemption and receive the benefits of leasing. We found this approach to be successful resulting in $7,000 in savings per truck at the end of the year.
Truck Insurance
After fuel, the next largest expense is insurance. Insurance is the most important part of any trucking company and requires a lot of attention.
