Owning your own truck can be a lot of work, but being your own boss certainly has its advantages.
Is becoming an owner-operator worth it? It's safe to assume that every company driver has pondered the question at some point in their career. The truth is, much of it depends on your personal situation and priorities. Here are a few important points to bear in mind.
Owner Operator Financing
When it comes to truck and trailer financing, there's much to consider. Given that this one purchase can mean the difference between a comparatively stress-freeprofitable business and personal bankruptcy, more than anything else, you need to get this one right.
Do you buy new or used? Is it wiser to lease, or should you obtain financing? Regardless of your decision, be prepared for a substantial long-term financial commitment.
Here are a few more key factors you'll need to weigh in.
- Credit ratings
If you want to finance your truck purchase, you'll definitely need a strong credit score.
Trucking is regarded as a high-risk enterprise, which is one of the reasons why banks and other lenders financing offers are typically quite conservative. And if it's your first truck, you'll likely be required to come up with a down payment between 10% -20% for lenders to consider your application.
As with any vehicle, you'll need to have purchased insurance before you can drive it off the lot. Depending on your driving record and how many years of experience you have, insurance premiums will vary. You will need to look around for the best solution as insurance can be expensive.
Owner Operator Insurance will not be offered by everyone, so again, you will need to look for the best option for you.
Finally, you need to decide how much insurance you actually need and do a cost-benefit analysis. Understandably, nobody wants to buy any more insurance than they absolutely have to, but nobody needs the stress of feeling they may be underinsured, either.
- Fuel economy
It goes without saying that the better your truck’s fuel efficiency, the more money that will be staying in your pocket.
How large and powerful a truck will you need for the kind of contracts you're expecting to take on? While newer vehicles tend to be more fuel efficient both by design and by virtue of having seen less wear and tear, they're also going to be more expensive than an older vehicle. However, a well-maintained older vehicle that’s built with fuel economy in mind might be the most cost effective option when you're first setting out.
- Word on the street
One of the wisest things you can do before investing in a vehicle is talk to other drivers and see what they have to say about their own trucks. Getting first hand information from other drivers can be an invaluable source of information.
Owner-operator start-up loans and permits
Once you've settled on your truck, you'll next need to file for permits you're required to have before you can legally start working .
Each one of these permits typically requires capital, so after having made the financial arrangements required to acquire your truck, you'll still need some extra start-up money to cover these additional expenses -- which you'll find have a way of adding up very quickly.
The Owner-Operators Independent Drivers Association (OOIDA) recommends setting aside a minimum 60 days of operating capital, but if you're in a position to comfortably increase that figure you would be wise to do so.
Among the first things you'll need to set up and pay for will be your International Fuel Tax Agreement (IFTA), your Unified Carrier Registration (UCR) permit, and if you expect to be operating in the United States, your Heavy Highway Use Tax (also known as the Heavy Vehicle Excise Tax or HVUT).
Assuming you'll be doing runs within the borders of the United States on occasion, if not exclusively, you'll also need to know which states require truckers to purchase special permits. Some states, New York, Kentucky, Oregon and New Mexico among them, require you to purchase both an additional permit and a bond.
You'll also need to be registered in a drug and alcohol testing program and require Intrastate Operating Authority, as several states demand additional clearance if you're going to be picking up and delivering loads within their borders.
As mentioned earlier, all of this costs money, so you'll need to be prepared to cover these expenses before you can get to work and actually start bringing home some income.
The bottom line
Starting your own business as an owner-operator can bring great rewards. If you do it right and are perhaps blessed with a little bit of good luck, you'll undoubtedly bring home more money at the end of the year than you would as a company driver.
But being an owner-operator isn't for everyone. Driving truck is already a big responsibility and by its very nature comes with its own stressors. In light of the financial risk and general considerations involved, there's definitely something to be said for letting somebody else worry about the logistics, truck repairs, invoicing, and innumerable other responsibilities that come with being an owner-operator while you just drive and collect your steady company paycheque every week.
The direction that’s right for you depends on your personal disposition. Ultimately, the bottom line is whether the extra stress and responsibilities that come with being an owner-operator are worth the potential of earning more money.
Ready to grow? Our team is available to answer all of your questions. Contact us to find out more about your financing options.