Many years ago when I was a Recruiter the company I was with at the time kept losing good drivers to other companies that offered a Lease Purchase program.

Most of the time they would eventually come back after having failed in such programs, and they would bring me their lease agreements and program details more often than not – because I asked them to.

What I quickly learned was that most of those programs were seemingly designed for them to FAIL.

They were set up very lopsided with almost all the benefits going to the company and almost none going to the truck driver wanting to be an owner operator.

They charged them crazy prices for the trucks, then kept the payment terms very short so the payments would be sky high – per week usually – and would be automatically deducted from their settlements.

They also passed along almost all maintenance and repair costs to the driver – yet the truck remained titled in the company name and they were “leasing it to purchase or lease purchasing it”. Of course, all fuel, tolls, and most of the other expenses were also the driver’s responsibility.

Yet at the same time, the driver was CAPTIVE to that carrier.

Meaning they were not allowed to take the truck and lease on to any other carrier.

They were not allowed to get their own authority and book their own loads independently.

They were not allowed to use load boards to help find freight and book loads either – so all their loads came from the company running the program only.

Typically they remained under the dispatch control of the company’s department that handled company drivers – or were assigned to a manager who reports to that department.

The company remained in total control and had payments set so high – along with expenses – that the drivers had no choice but to run their asses off if they even hoped of staying ahead of all the costs – let alone making any money at all.

Many didn’t make much either, despite their best efforts – and others fell behind on payments – or were starved out by the company (which controlled the freight) and lost the trucks they were driving when the company took it back.

They would then push some other newbie into repeating the whole process – with the same truck again. So the same truck is “sold” as a lease-purchase truck over and over again several times at full market price PLUS jacked-up inflated pricing no one would ever pay for it outside of such an agreement.

Why? Because the same truck is readily available for thousands less elsewhere – and because no finance company would finance something that far over its actual value (no equity in it for repo in case of default).

When I looked at net income – most made LESS than their company driver counterparts within the same company!

So eventually many quit after they caught on and realized what was actually happening – at least net pay-wise.

This usually only occurred after months of running freight and working their asses off for chump change – when they finally realized the reality of their situation and that it was a no way to win situation – so they would quit and return to me or another company as company drivers.

After wasting months and thousands of dollars.

Yet the other motor carrier made out like a bandit. They had them deliver loads that made the company massive amounts of money (doing this with hundreds of drivers at the same time) while paying them next to nothing at all and making them pay almost ALL expenses.

A  sweet deal for crooked companies.

Not much of a good deal for the unlucky participants.

An ICA Programed Designed for Drivers to Achieve Trucking Business Success

With all that in mind, I set out to design and create a lease purchase program that was different – one that truly would give them a chance to be successful.

Obviously, the company still has to make a profit. But a fair and reasonable profit and with truth and honesty about all costs and potential benefits as well as risks.

The main idea was to improve both Recruiting and RETENTION long term. My idea was to have them progress through the ICA program to full Owner Operators (with paid-for trucks) and then lease on or get their own authority and run under a brokerage division of the same company that I also had them set up.

Again the company screwed that up too – as they put the brokerage under the direct control (and interference) of the company Ops manager and dispatchers. Bad mistake… but that is a whole other story and one I will cover in later posts.

Eligibility for the ICA Program

The first thing was to have a requirement that a candidate/applicate run at least 90 days with the company as a company driver first – so the driver knows the company and the company knows the driver.

Next, they would have a one on one consultation where all program requirements, benefits, and liabilities would be gone over so they could make informed decisions – and they were given everything in writing. They were encouraged to think it over for a few days and discuss it with family and take it to their own lawyer if desired.

No pressure ever to join.

Then if they wanted in they had to apply.

We looked at their performance and attitude as a company driver from a Safety and Operational perspective based on their actual work history over at least a few weeks. So nobody could just come in the door – or come in as a complete rookie trainee and go right into the program.

That was different – most other companies targeted, recruited, and pushed their programs on complete newbies (who had no clue and did not know any better) and sold it on the idea of being in their own trucking business, being an owner operator, and having the potential to make a lot more money than their own company drivers.

That was almost always complete bull shit and lies.

In most cases, their own company drivers did far better than their lease purchase drivers ever did on NET income. That is important to understand in Business. Your gross doesn’t mean much – what matters is net income after all expenses.

Next the program I designed also included training, consulting coaching, and mentoring.

Before they entered the program they were trained. During the program, they were coached and mentored, During the program, they also had the ability to have a consultation as needed on a weekly basis to go over all their numbers and performance.

Walk Away Easy Provision

Anytime for any reason, they could quit the program and revert back to company driver status and even keep the same truck. Just a call and a quick visit to sign a statement that they were quitting the program and wished to remain as company drivers – and a few internal admin forms to switch them over was all it took.

They were told though it was a one-way trip – so be sure. in other words, they could only do that once and would never get another chance to reenter the ICA program. Of course, they could always go out and buy their own truck on their own and leas it on as an owner operator that way f they so desired.

What I Learned

Driver performance immediately improves when drivers are paying for fuel, tires, and other expenses – and they understand them and what to do to do better.

Most drivers want the TITLE of Owner Operator yet few actually know what that really means and what it really takes to earn it and keep it in reality over the long haul.

So long as they were ACTIVELY IN THE PROGRAM most of them did very very well.

Again there were mandatory things they had to do including putting money aside weekly for an Emergency Reserve Fund (It was their money and they could pull it out  – but if they did they would be discharged from the ICA program as it was a mandatory requirement). They would be able to use it for EMERGENCY repairs such as a turbo, or tire problem on the road. Then they had to replenish the amount drawn with weekly settlement deduction deposited into that account until it was back to a set level/limit.

While they were active in the program they all did this without fail and without compliant s of problems – and they understood it well. Yet as soon as they completed the program and were given the title to their own paid-for truck and complete autonomy with regard to handling their ERF and repairs alone… most of them quickly failed.

One who had done very well in the program, and completed it succumbed to pressure from his wife to use the emergency reserve money to buy Christmas presents for their extended family! WTF… yet he did and you may be able to guess the rest.

He had a breakdown – one that would have easily been covered by the amount in his ERF – but due to him draining it dry he couldn’t make the repair payment and he had apparently mismanaged his personal fiance so bad he had no credit or tother source of funds to make it up.

He elected to sell his truck to another owner-operator and returned to driving as a company driver.

What a shame.

Others continued to follow the lessons they had learned and went on to do very well over the long haul as independent owner operators and a few even managed to build their own small fleets.

But most of them still failed even after they had successfully completed the program and had PAID for TRUCKS!

Why?

Ego and impatience along with listening to BAD advice from family and friends who were clueless about trucking and business completely.

One took a paid-for truck, one he had rebuilt almost everything on except the engine, transmission, and rears – and elected to trade it in to a dealer for almost nothing so he could get a newer truck. The dealer did a bait and switch on him – and the truck he thought he was buying wasn’t even there when he arrived.

When they entered the program each and every driver was told to also on their own begin saving up to rebuild the engine in their trucks (Detroit 60 in most) as they were all older trucks and had a lot of miles – and it was not a question of if but rather when they would need a rebuild.

While they were in the program they were covered as the company would either front the money (zero interest and at cost) for a rebuild – or let them move over into another similar value truck if one was available.

After the program was complete they were on their own.

His engine was fine – but his transmission developed some problems and need to be rebuilt or replaced. He should have had more than enough in his ERF – but like the others – he spent it on BS and had no ERF anymore.

Instead of finding a way t fix his truck, he got the idea he would get another truck from a dealer since he was now an “experienced Owner Operator”.

But he was broke and desperate – so he signed off on a $60,000 truck loan at jacked-up interest and that was about $20k more than the thing was worth.

Within a year he was out of business and back at another company as a company driver.

What a shame too.

The desire for Trucking Business Success must be backed up with self discipline to do the things that must be done to achieve and maintain success in trucking.

Many talk the talk but a lot fewer will actually walk the walk long term on their own.

Company Driver Performance Increases

When company drivers know they have options within the same organization they are far less likely to leave and jump ship seeking such things elsewhere.

So that helps retention.

The ones who also have an aspiration of getting into one of the programs like ICA or who want to get their own authority (with the help and support of the company) so they can run their own truck through the brokerage division are far more likely to stay with you long term.

 

Other Motor Carrier Lessons Learned

The company only had a hand full of owner operators leased on and many had been there awhile. They had their set runs and that’s about all they did and it wasn’t difficult for Operations or them to get along as Ops knew and respected the fact they owned their own trucks in their own names and could easily leave at any time – so they made a lot more effort to treat them with respect and work with them.

When we set the ICA program up (Independent Contractor Associate) these drivers had all been company drivers under a forced dispatch system. If you are an old hand you know what that means – and if not let me explain it to you.

It means that a company driver driving company equipment is an employee and can be directed on what loads to take. Employees are treated as such and are dispatched at the needs of the company and have no choice other than to go where they are sent and do as they are told – or quit or be fired.

There is not much discussion to it. “Here is your load assignment and the details – have a safe trip” basically is the way that works.

So when these same drivers – who yesterday were company drivers are redesignated as ICA’s – Operations had a mental problem reclassifying them as such and wanted to keep “Dispatching” them like company drivers.

There are multiple problems with that.

The first is a legal one – that many dipshit large (and greedy) megacarriers found out about the hard and expensive way by losing very large class-action lawsuits against them.

You can NOT treat a person like an employee and pay them like an Independent Contractor. Period.

If you do, then get a damn good lawyer because it is only a matter of time before you are sued too – and you will LOSE. So my recommendation is either learn to set your program up better – or don’t set it up at all.

ICA’s/Owner Operators must have some say-so on what loads they take and what they reject.

Otherwise, you are running a Forced Dispatch program and they will likely be reclassified as EMPLOYEES – with all the penalties of employees (including Work Comp and withholdings, employer contributions, benefits eligibility, etc). Numerous lawsuits illustrate this – so feel free to research it and read all about it (hopefully BEFORE you create a BAD program following their already failed broken models!)

Which of course is exactly what many greedy large carriers wanted (and some still do to this day) to have the cake and eat it too. Meaning they want to run the driver like an employee (overtly or through manipulation with high payments to keep their trucks) – yet pass along almost ALL expenses to the (wannabe) Owner Operator – lease purchase program participant.

By the way – companies who do this only do so for one of two reasons;

A.  Complete ignorance and stupidity on the part of senior motor carrier management

B. Fully knowing what they are doing is wrong on every level – but intentionally choosing to do it anyway because of the massive potential profits they will make if they can get away with it.

 

Which do you believe is the reason? Take your pick – A or B.

Another is a practical reason. A company that hauls twenty or more loads per day for a specific customer/account can afford to take some losses on some of them if the others make up the difference and yield a good profit.

So the company is still making good money all along.

However when you are a Trucking Business of ONE – as a leased on owner operator or ICA – you can’t do that.

Let’s just use simple math (not accurate with today’s rates but just to illustrate a point) and say the load is going to pay you $1.00 per mile but when you add up your costs they come out to $1.25 you are making NOTHING!

Even worse you are actually PAYING for the privilege of running the load for FREE.

Now imagine you are an office employee. You show up and work your butt off all week and put in your 40 plus hours. But instead of getting a paycheck – the company hands you a bill and says you OWE THEM $250!

As an owner operator you MUST understand this and never run loads at a loss. You certainly can’t do it very often if you want to stay in business.

Yet I had to deal with people in Ops who were either stupid or were intentionally trying to destroy the ICA program and all ICA’s businesses in the process.

If you are a fleet owner wanting to set up an ICA (Lease Purchase) program and you want it to be successful without as many personal interventions on your part (and without drama and headaches) then set up a SEPERATE Load Coordinator (dispatcher) for your ICA’s and Owner Operators who does NOT report to your operations manager in any way.

Make this person or department equal to and separate from your Operations Department – and hold them accountable for their own profitability. You will get far better results and enjoy life better too.

Well, that is enough for now to give you a few things to think about anyway.

We will get more into the weeds of all this in future posts – so if you are interested in such information be sure to subscribe and check out our YouTube channel and FaceBook group too.

Until next time, have a great day, make it count, and be safe!

Best regards,

L.D. Sewell

 

 

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