2012_TTJM_AllPages

Owning
the wheel
Consider carefully
before signing a
contract
BY cliff abbott / Contributing WRITER
Owning your own truck can be a rewarding
experience, but it can also be an exercise in
frustration. Like any business, there are tasks
involved outside of the main focus of trucking.
Managing a business includes finding and
serving customers, billing and debt collection,
taxes, maintenance, compliance, accounting,
record-keeping and more.
Some drivers are excellent businesspeople and
are able to handle all of these tasks themselves.
Some have a friend or family member that
handles the business side, allowing them to
concentrate on the job of moving freight. Others
are willing to pay professional services to handle
the business details.
Another option chosen by many truck owners,
is to lease their equipment to an existing carrier.
Most carriers have staff that handles the business
details. When you lease on, the carrier’s staff
works for you, too.
The term “lease” can seem confusing, but it
really isn’t. Under a lease, you allow a carrier
the use of your equipment, just as if they were
renting the truck from you. The carrier uses your
equipment and, in return, you get a portion of the
money they make with it. The difference usually
is that you are required to provide a driver for the
truck, even if it’s yourself.
While leasing your equipment to a carrier
can reduce your workload, it also reduces the
compensation you’ll receive. After all, adding
your truck to their fleet helps the carrier increase
revenue. It’s important to fully understand how
you’ll be compensated as well as your obligations
under the lease contract you’ll be signing.
Compensation
Some carriers pay a flat percentage of the load
revenue, while others pay a set per-mile rate.
A set rate per mile means your compensation
won’t be affected by current freight rates paid
to the carrier. Percentage compensation means
the rate you receive will fluctuate with freight
rates paid to the carrier. If you’re compensated
by percentage, it’s important to understand the
complete picture. Will you receive a percentage
of the total revenue, or the revenue that’s left
after the carrier makes various deductions? Will
the carrier show you the amount received from
the shipper?
Assessorial pay should be clearly spelled out,
too. How much will you be paid when you and
your truck are held up at a shipper or receiver?
How much time must you contribute before the
rate kicks in? What about layovers? What other
activities will you be compensated for?
Chargebacks
When your equipment is leased, it is usually (but
not always) covered under the carrier’s liability
insurance policy. Some carriers charge you for
liability, cargo and other insurance coverage.
Some charge a rental fee for pulling their trailers,
or other fees for administrative tasks and so forth.
Those charges should be clearly spelled out in the
lease agreement, either in the body of the text or
by an addendum to the contract.
Escrow Accounts
Nearly every carrier will require you to keep
money in at least one escrow account. An escrow
account is a special savings account that carriers
can access to pay insurance deductibles, freight
claims or other expenses determined to be your
responsibility. Some require an escrow deposit
to begin the lease, but most will allow you to
build the escrow through settlement deductions
over a period of time. It’s important for you to
know how much the carrier will hold, what it
will be used for, and when and how you will
have access to your money.
Another type of escrow is sometimes kept
for maintenance purposes. The carrier will
keep a percentage of each settlement amount
until a predetermined threshold is reached, out
of which it will pay for repairs and maintenance
to your truck. This arrangement can allow the
carrier to pay for discounted maintenance
services through its network, saving you from
having to come up with cash when you break
down. Like any escrow, however, you should
know the limitations including how to access
your money.
Maintenance and tire discounts
Some carriers will allow you to participate
in networks from which it receives discounted
pricing for parts and labor. Some will even
perform repair and maintenance functions
in their own shops for a discounted fee. It’s
important to understand what services are
available and what they cost.
Independence
As an independent contractor, you have the
right to decide when to work and which loads to
accept — and you can take loads for other carriers,
too. Many carriers, however, will dispatch your
truck just like its own and claim exclusive use
of your equipment. You should understand how
you’ll be dispatched and the carrier’s exclusivity
rules before you sign a lease agreement.
Leasing your truck to a carrier can be a
successful strategy for a profitable business, but
it’s important to fully understand the terms and
conditions of the lease agreement before signing.
Do your research, and choose wisely.
28 the trucker jobs magazine | DECEMBER 2020/JANUARY 2021 www.TheTruckerjobs.com