Lease Purchase Trucking: A Smart Start?

The development of e-commerce, building new supply chains and channels, led to an enormously increased demand for trucking and delivery services. That creates a very welcoming environment for stepping into the industry as an owner-operator. Yet, such a choice is always associated with initial costs and significant spending, including buying a reliable truck, which can be too expensive for most enthusiasts.

Whether you are still collecting money for buying a truck or trying to avoid spending before being sure that such a job is right for you, lease-purchase trucking can be a useful option. However, before taking a decision and stepping in, learn more about the pros and cons, which are not always obvious, when it comes to lease purchase trucking. This article will help you understand all the important details!

Lease Purchase Program: How It Works

Many companies that sell or offer trucks for lease provide attractive programs for drivers. In short, you pay for a vehicle lease monthly until you cover its full cost. After that, you can own the truck. The greatest part of it is that you can use the vehicle and earn money years before buying the truck.

Alternative Lease Purchase Programs

Despite having the same core principles, lease purchase programs differ by their conditions, payment options, terms, etc. Traditionally, a lease purchase program offers you to make an advance payment and keep paying the lease price monthly until you cover the full price of the truck. Such programs often go together with professional support and supervision, which makes them especially attractive for those who are just making their first steps inside the industry. However, today you can also find some alternative programs.

Lease Operator Agreement

Some shipping companies offer you a truck to lease and provide you with fleets and orders. In fact, you work for the company, receiving payment for each route, paying for a truck lease in return. In such a case, you don’t need to make a down payment, yet you also can’t own the truck, no matter the total sum of your lease payment.

Such an agreement can be useful if your priority is getting experience and understanding of how the business operates. Moreover, that can be a smart option if you want to work immediately, without collecting money for the down payment or struggling with organizing issues.

Lease-to-Own Agreement

This option gives you more freedom in operating your truck with timely, regular payments each month. In such a case, you may owe the truck after paying its general price, yet you’ll also have some extra headaches, like obtaining permits, doing regular maintenance, finding your clients, etc.

Is such an agreement good for everyone? This can be too challenging for newbies, with a need to prepare all the documents and permits. Finding orders can take a long time, yet you have to pay for leasing the vehicle under the condition.

Important Conditions of the Agreement

Before signing any type of agreement, it’s crucial to carefully review terms, payment options, and other details. That’s especially needed when it comes to leasing and purchasing an expensive truck. Here are a few points that you shall always pay attention to:

Length of Lease

This term can be very variable, yet most commonly the lease lasts around 1-3 years. Most agreements are valid for a year, so when the year is finished, you buy the truck or sign another deal for next year.

Monthly Payment

How much are you able to pay monthly? If your payments come with extra fees, you may be interested in buying your truck as soon as possible. On the other hand, you shall be sure you can earn money for a monthly payment and your living expenses each month.

Buyout Options

Many drivers underestimate this clause of the contract, yet sometimes it matters. Some companies allow purchasing the truck at any time, paying its cost and ending the agreement. While others insist that you can own the truck only after the leasing period is finished.

When a Lease-Purchase Deal Is a Smart Move

There are many cases when lease purchase trucking can become a smart choice and bring crucial benefits:

New Truck

If your start-up budget is strictly limited, all you can afford is an old vehicle that needs core maintenance and is not really reliable, especially for long-haul journeys. In such a case, it’s better to sign a lease purchase contract that will help you to buy a new truck smoothly, while it already brings you earnings.

Guidance and Support

If you are new to the sphere or don’t feel your trucking experience is enough to become an independent owner-operator, lease purchasing gives you the necessary support. Most carriers who offer vehicles for lease can help you with informational support, give some useful training, or even help you get your first orders.

Challenges of Lease Purchase Trucking

While at first glance, the lease purchase option looks like something seamless and beneficial, it’s not always so. Signing any type of agreement, you obtain certain responsibilities. This may limit your independence, especially if the agreement sets some limits for your working time, transportation distances, and rates.

You have to make a monthly lease payment even if you have no or little earnings. At the same time, you become an independent contractor who has to pay taxes and governmental fees when necessary. Sometimes, such responsibility turns out to be too stressful.

Summary

Lease purchase trucking often works great for many entrepreneurs, especially in cases when the start-up fund is limited. If you need a reliable truck immediately and have no doubt you can pay for it during a year or two without breaks or difficulties, a lease-purchase deal may become a starting point for your business’s success. Yet, in other cases, you may find out that such deals come with limits for your operational freedom and increased responsibility. It’s important to understand your needs, goals, and possibilities before making the right decision.