Many people dream of being their own boss. For truck drivers, this level of freedom is easier to reach than in many other professions. That’s because the trucking industry is structured in a way that leaves room for independent truck drivers to thrive.
Beginning a career as an independent truck driver requires the necessary licensure, permits, insurance, and a few other preliminary items. Once those are all in order, the only thing missing is a truck. But semi trucks are expensive and, more often than not, newly independent truck drivers are short on operating capital- especially after paying for permits and insurance.
Due to the need for down payments, credit checks, and interest fees, purchasing a truck with a loan is often difficult for someone starting out. That’s why the road to career freedom for independent truck drivers often starts with leasing a semi truck.
What Does It Mean To Lease a Semi Truck?
Most newly independent truck drivers don’t have a lot of capital to start with. As a result, many begin their owner-operator journey by renting or leasing a semi truck rather than buying one. Similar to a car lease, a semi lease involves borrow a truck from a leasing corporation by paying a set amount per month, usually without a down payment. Typically, the leased vehicle does not belong to the truck driver when their lease is up. However, many leasing companies offer a purchase option at the end of the lease period.
Is It Better To Lease or Buy a Semi Truck?
Leasing and financing (purchasing a truck by obtaining a loan) have several pros and cons that you’ll want to evaluate before deciding which approach is best for you. The primary factor that will determine which path you select is the amount of starting capital you have at your disposal.
To help you in your decision, we’ve created this table to highlight the key differences between leasing and financing a semi truck.
How Much Does It Cost to Lease a Semi Truck?
The average cost to lease a semi truck ranges between $800–2500 per month and there are a few factors that affect the cost of a lease, including your credit score, experience, and whether the truck you lease is used or new.
To get the best price on a semi truck lease, follow these tips:
- Make sure the month-to-month cost of the lease doesn’t exceed what you would pay per month if you financed a purchase.
- Determine if the leasing company’s mileage cap is viable for your business model. At most leasing companies, going over the mileage cap will incur additional charges.
- Shop around and compare prices, terms, and conditions to make sure you get the best possible deal.
Leasing a semi truck is a viable alternative to financing if you are working with a limited budget or have problems with a bad credit history. It’s also a great way to get up and running with your new business while minimizing risks. Keep in mind that leasing companies come in a variety of business models, so do your homework and follow some of the guidelines below to find the best lease for your situation.
What Are the Requirements To Lease a Semi Truck?
The exact requirements to lease a semi truck may vary from company to company. However, there are a few universal guidelines to follow when starting to obtain a lease.
Gain Sufficient Experience
It’s usually recommended that new truck drivers spend at least a year working as a company driver before striking out on their own. Additionally, it’s not unusual for certain leasing company business models to require a minimum level of experience - usually one to two years.
Know of the Differences Between Leasing and Financing
Research the differences between leasing and financing and make sure you thoroughly understand the leasing process. This way, you won’t be caught off guard when setting up your lease or renewing it after the lease term.
Get Your Paperwork In Order
This includes insurance, USDOT number, access to or the possession of an MC number, IFTA, and the other permits and registrations needed to start operations make use of your leased truck.
Create a Thorough Business Plan
Your business plan should include the type of freight you intend to haul, whether you want to lease from/to a specific company and work within their ecosystem, or why and how you want to be an independent driver and business. It’ll help you make more informed decisions about your lease as well.
Make a Clear Budget
Know your budget inside and out so that you don’t overextend yourself with high payments for your lease. Breaking into this business can be difficult, but there are still ways to save money as a truck driver and cut back on costs.
Talk with Several Leasing Companies
Pay careful attention to each company’s terms and conditions. Look for a lease that will give you the most flexibility. Look out for mileage caps, the type of equipment they lease, and their cost range.
Fill Out an Application
Once you’re ready to go and you’ve found a company that meets your needs, they will have application paperwork you will need to fill out and submit to be considered for the lease.
Read the Paperwork Carefully Before Signing and Submitting
Make sure you understand the company’s policies on mileage caps, additional miscellaneous charges, maintenance policies, etc. If there is anything in the lease contract that makes you feel uneasy, or is not going to work with your business model, exercise caution and reevaluate your options.
First Time Semi Truck Financing
Financing a semi-truck for the first time can be complex, but with careful planning and research, you’ll secure a favorable deal. If owning your truck is a better fit for you than leasing, here are some tips to consider when financing a semi-truck:
1. Assess Your Finances:
- Credit Score: Check your credit score and history. A higher credit score usually results in better loan terms.
- Budget: Determine how much you can afford to spend on a truck. Consider down payment, monthly payments, insurance, maintenance, and operational costs.
2. Research Lenders:
- Banks, Credit Unions, and Online Lenders: Compare interest rates, terms, and conditions from different financial institutions. Online lenders might offer competitive rates.
- Specialized Trucking Lenders: Some lenders specialize in financing commercial vehicles. They might understand the trucking industry better and offer tailored solutions.
3. Understand Loan Types:
- Secured vs. Unsecured Loans: Secured loans use the truck as collateral, which might result in better rates. Unsecured loans don't require collateral but often have higher interest rates.
- Fixed vs. Variable Interest Rates: Fixed rates provide stable monthly payments, while variable rates might change over time, affecting your payments.
4. Explore Government Programs:
Do some research to find out if there are government programs or initiatives that offer financing assistance to small businesses, including truck owner-operators.
5. Prepare Documentation:
Lenders will require various documents such as proof of income, business plan, tax returns, and personal financial statements. Have these documents prepared and organized.
6. Negotiate Loan Terms:
Negotiate the loan terms, including interest rates, repayment period, and any associated fees. Don’t hesitate to ask questions and clarify terms you don’t understand.
7. Read the Fine Print:
Carefully read the loan agreement. Ensure you understand all terms and conditions, including penalties for late payments or early repayment.
Remember, every financing situation is unique. Tailor your approach based on your financial standing and business needs. Taking the time to research and plan will increase your chances of securing a favorable semi-truck financing deal and becoming a successful new owner operator.
Becoming an independent truck driver can be a life-changing decision, but it’s not a path you have to travel on your own. CloudTrucks is here to help you make the most of your truck driving career. We provide a full suite of business tools to get your company going, and we’ll stick with you for as long as you want.
Whether you need help with leasing, obtaining an MC number, or finding loads, CloudTrucks is here for you and your business. If you're ready to put your career in the fast lane and maximize your freedom as an independent driver, sign up for CloudTrucks today.