One of the easiest highways to truck ownership is to enter a lease-purchase agreement with a carrier.
Unfortunately, this can also be a path to failure. Some lease operators have complained of predatory practices by carriers, including overpricing of trucks, unfair maintenance and other fees, and deliberate reduction in available loads to encourage default.
A task force to study the “terms, conditions and equitability of common truck leasing arrangements” was mandated by a provision in the $1.2 billion Infrastructure Investment and Jobs Act (IIJA), signed into law in November 2021 by President Joe Biden. The bill is best known as the Bipartisan Infrastructure Law.
Members of the task force, which includes motor carriers, unions, consumer protection groups, attorneys, educators and owner-operators, were named on May 1, 2023.
The task force is to report its findings to the U.S. Secretaries of Transportation and Labor, including recommendations for best practices for informing drivers before they sign agreements, assisting those who are having issues with current agreements, and helping drivers who are currently in predatory agreements. Additionally, the committee is to recommend changes to current laws.
Why even bother with a lease-purchase agreement if it could be predatory?
When operated properly, lease purchase agreements at their best provide a benefit for both the carriers and the drivers who participate:
- Carriers find an outlet for used equipment that is often more profitable than simply trading it in — plus, they have an incentive to retain drivers who might have otherwise gone elsewhere for a chance to own their own trucks.
- Drivers are often offered easier financial arrangements with a low (if any) down payment and less stringent credit requirements. It’s a rent-to-own arrangement that many drivers have used to start their own independent trucking businesses.
There are also third-party companies that work with carriers to provide trucks for lease-purchase agreements. These arrangements allow carriers to provide a greater variety of equipment and help lessen the administrative burden from the carrier, who sometimes agrees to collect lease payments and other fees from drivers on behalf of the leasing company.
One key benefit of the lease-purchase arrangement is the relative ease of terminating the agreement if things don’t work out. Carriers may offer a “walk-away” lease, where a driver who determines that truck ownership isn’t for them simply turns the truck in and goes back to work as an employee. The carrier is then free to lease the truck to someone else or to dispose of it in some other manner.
So, what’s the catch if I can just walk away?
Terminating the lease-purchase agreement isn’t always equitable to both partners.
If, for example, the driver leasing the truck hasn’t kept up with regular maintenance or the truck has been damaged in an accident, the carrier could be stuck with repairs the cost of which could exceed the value of the truck. In addition, bills for fuel, towing or fines from citations can sometimes come in long after the truck has been surrendered by the erstwhile driver.
The driver, on the other hand, may find themselves obligated to have the truck repaired at carrier locations at an expense set by the carrier, and may even be restricted in choices for insurance coverage, registration and even fueling. Some drivers have complained their carrier knew about likely mechanical issues before leasing the equipment and then required the drivers to foot the bill.
Because lease payments and other expenses are typically deducted from the driver’s settlements, the amount the driver actually receives can be less than expected — and this may cause hardship at home.
Some drivers make the problem worse by not running enough miles to cover the expenses with enough left over for a paycheck. However, other drivers have claimed that carriers cut their miles in an intentional attempt to get them to fail so the carrier could reclaim the truck and lease it to someone else.
While a walk-away lease may appear beneficial to a driver who wants out, equity can be an issue. When the driver buys a truck outright and then has difficulty meeting the payments, he or she still owns any equity that has accumulated. It might be possible to sell the truck, pay off the lending institution and have some cash left over.
In a lease-purchase agreement, the truck goes back to the carrier, which owns any residual value. The driver may even still owe for any delinquent lease payments.
Because many lease-purchase deals include the expectation that the driver will continue working for the leasing carrier until the truck is paid for, the driver is dependent on the carrier for the income needed to make the lease payments.
If the carrier loses customers or sees a decline in the amount of business it handles, the driver’s compensation can decline, too. Accusations are sometimes made that the carrier reduced the driver’s income, but such claims are difficult to prove.
You can make your voice heard on Capitol Hill.
The Truck Leasing Task Force was created to study the different nuances of lease-purchase agreements.
Drivers are invited to participate and to submit comments or other documentation. A meeting held on July 18, 2024, for example, lists letters from both the Owner-Operator Independent Drivers Association (OOIDA) and the Truckload Carriers Association (TCA), as well as comments from the Consumer Financial Protection Bureau and from a carrier that is 100% owner-operator.
Everyone is encouraged to participate in upcoming meetings, which are conducted virtually via ZOOM. However, you must register for the meeting at least a week in advance — and if you want to submit written materials for consideration, you must also do so a week in advance of each meeting.
The next meetings will be held on Wednesday, Oct. 30, and Thursday, November 20, from 10 a.m.-4 p.m. You must register in advance for the meeting at fmcsa.dot.gov/tltf. A copy of the agenda for each meeting will be available at the same website a week before each meeting. Copies of the meeting minutes are posted on the website after each meeting concludes.
A public oral comment period for drivers and lessees of CMVs will be included in each meeting, but due to time constraints, comments will be limited to two minutes. Any written comments, however, will be included in the permanent record.
Interested parties can read the announcement of the October and November meetings and register to attend at fmcsa.dot.gov/tltf.
Cliff Abbott is an experienced commercial vehicle driver and owner-operator who still holds a CDL in his home state of Alabama. In nearly 40 years in trucking, he’s been an instructor and trainer and has managed safety and recruiting operations for several carriers. Having never lost his love of the road, Cliff has written a book and hundreds of songs and has been writing for The Trucker for more than a decade.
