Many owner-operators start their careers by leasing their trucks using a lease-to-own program. While there are a number of options when obtaining your equipment there are some that should be avoided at all costs. We call these programs “never-never programs” because they make it virtually impossible to pay off your equipment and become an owner-operator.
Here are 9 red flags to look for when considering equipment lease purchase programs.
Make sure the company you are considering has many owner-operators that have completed the program. Speak to their owner-operators and ask about their experiences. You want to hear that most of these owner-operators were first lease-operators and successfully paid off their truck with few issues.
Go online, research the company, and pay attention to what other drivers say. Use several platforms like Google, LinkedIn, and others. While you should pay attention to negative reviews, you should also pay attention to good feedback to get a general feeling for that company’s policies.
Make sure you can pay off your truck earlier if you want to. Some companies may hide a clause in their contract that forbids an early payoff. Your interest rate should also never be more than ten percent. Make sure that the “buyout” amount isn’t too high, or you’ll pay more than what your equipment will be worth.
Ask about penalties for missed payments, and ensure that your contract states you have full ownership of your truck when you’ve completed the lease-payment program.
Be wary of leasing brand-new equipment. The payments are often too high, and the odds of being able to keep up are very low. Look for a company that allows you to choose the right equipment to fit your budget. Your best bet is to choose equipment that’s a few years old. Also, choose a plan that includes a “buyout” option after three to four years.
Companies that are eager to lease to new drivers know that they are more naïve than experienced drivers. Brand new drivers aren’t as familiar with what to look out for when leasing their equipment, so they often fall for a company’s bad leasing practices. Good lease purchase programs will only allow experienced drivers or drivers who have at least a few months of experience driving for a company to sign on to their programs.
You want to make sure the company you are signing your lease purchase contract with will provide you with enough mileage to pay your equipment off. Don’t take part in their lease purchase program until you’ve driven with them for at least sixty days and are sure you will be able to make enough mileage to pay for your equipment. Get a feel for their dispatch, loads, and routes. Don’t ever go in blind, or else you might be disappointed with the number of miles you get.
Your goal at the end of your three or four-year lease is to pay it off and have an asset in your name. You’ll also get to earn owner-operator rates. Companies that push you to take on a new lease after you’ve completed a lease purchase program are only out to make a profit. They are not looking out for your best interest. Try to avoid them at all costs.
Remember, if it seems too good to be true, it probably is. Make sure you work for a company for a while before you consider signing their lease purchase program. If they promise a certain amount of miles and you sign the lease blindly, you may end up sorely disappointed with the miles you ultimately get.
You don’t want to sign a lease with a company that’s not financially stable. If you sign a contract with a company that goes bankrupt, the banks will seize all of that company’s assets, including your equipment. Make sure the company is financially stable and has been around for a while.
Most drivers who lease with a lease purchase program have no other option because of bad credit. If you have good credit, your best bet is to go to a bank and finance your truck through a dealership. This gives you the opportunity to move around and the freedom to choose which company you want to drive for. Also, take a look at this our blog article to see the pros and cons of buying vs leasing.
Finally, keep these nine red flags in mind when deciding which equipment lease purchase program to choose. Do your research and steer clear of “never-never programs,” so you’ll be in a better position to climb out of debt and become an owner-operator who owns your equipment outright.