To lease, or not to lease? It’s a question often voiced by would-be owner-operators. What’s the answer?
The Federal Motor Carriers Safety Association’s Truck Leasing Task Force says “not.”
In a report released Jan. 17, the FMCSA stated in its conclusion, “inequitable leasing agreements and terms in the motor carrier industry,” 119 with noted differences between truck leases and auto financing that may create significant financial risks for drivers. Those financial risks may in turn lead to potential safety risks by not “properly incentiviz[ing] the safe operation of vehicles.”
The report was prepared for the Department of Transportation’s Truck Leasing Task Force (TLTF), which the Consumer Financial Protection Bureau (CFPB) serves as a technical advisor. The findings of this report are primarily based on contract text from truck lease-purchase agreements combined with experiences shared by truck drivers working under such agreements, which were received through a request for information (RFI) issued by the TLTF, supplemented with industry research where relevant. The truck leases supplied through the RFI differ from conventional financing agreements for automobiles and other light vehicles in significant ways, including:
1. Potentially confusing earnings and expenses projections: The information provided to drivers about predicted earnings and expenses may be confusing or potentially misleading.
2. Absence of comprehensible financial disclosures: Drivers may sign leases without ever being informed of basic financial information about the cost of financing, such as annual percentage rate (APR) equivalents or finance charges.
3. Broad default provisions: Default provisions in truck leases may be triggered for reasons beyond missed payments, insurance lapses, or imperiling the collateral, at any time, and in some cases for no reason at all.
4. Expansive remedy provisions: Most auto finance remedy provisions allow for repossession and acceleration of payments due upon default, but truck leases may define “damages” as large sums of money unrelated to actual losses realized by the finance company.
5. Use of escrow accounts and personal guarantees: The use of sizable escrow accounts and personal guarantees may enable the truck financing company to ensure payout for damages assessed in default.
6. Ease of inducing driver to relinquish truck: If driving the truck fails to generate revenue that exceeds the costs of the lease and operation of the vehicle, drivers may opt to relinquish the trucks rather than wait for repossession. RFI responses also suggest the threat of significant costs imposed under contracts signed by drivers may disincentivize the safe operation of vehicles in the following ways:
1. Driver compliance with the hours of service regulations and laws governing speed and safety: Drivers may be pressured to haul loads in violation of laws governing speed and safety by motor carriers affiliated with their finance company.
2. Pressure to operate unsafe equipment: Drivers may be pressured to haul loads even when they have deemed the equipment to be unsafe.
3. Timely repair and maintenance: Drivers may be pressured to choose between making expensive repairs needed to maintain a safe vehicle and the imperative to continue hauling loads.
The Owner-Operator Independent Driver Association (OOIDA) issued its response to the report which it states, “unequivocally calls for an end to predatory truck lease-purchase agreements. During several meetings hosted by the Federal Motor Carrier Safety Administration, the Task Force characterized these programs as fraudulent and oppressive, concluding that they are irredeemable and should be banned. OOIDA agrees and has voiced similar concerns for decades.”
Bruce Guthrie is an award-winning journalist who has lived in three states including Arkansas, Missouri and Georgia. During his nearly 20-year career, Bruce has served as managing editor and sports editor for numerous publications. He and his wife, Dana, who is also a journalist, are based in Carrollton, Georgia.
They’ve only been doing this for 50 years or more. Why so late to act?
Having done it company driver and LP contractor ,the industry acts like a criminal syndicate ,so the feds are correct in that respect. It will not be corrected by eliminating LP because the industry across the board is robbing drivers ,nearly all drivers .The rates and brokers ect. are all geared for maximum profit to the companies when the driver is the only worker which actually brings the money back to the company.Compensation has been dropping for the last 6 years.My pay was double of today and I was just barely making it,everything the feds are saying is true, lease contractors beware.
They need to leave this alone lease purchase programs are for people like me that don’t have all the money up front to purchase a truck or the credit I’m in a lease purchase program right now and not once have I’ve been taken advantage of I know plenty of people who started their business this way
I lease purchase and have no issues with it. The problem isn’t lease purchase but the retards that sign lease agreements and don’t read the contracts.
foreign nationals, illegals, migrants, drug cartels, serial killers, park truck on railroad tracks to detail a train for Allah -Castle with 72 virgin’s, sabotage America by hijacking load’s and taking it to Mexico or put in ocean shipping containers going to Mexico. are the people that lease a truck for crime.
What I’ve told many, many new & potential new drivers: NO lease program is designed for you to succeed. NONE,from NOBODY!
Yes, some get into a lease and succeed, tremendously. But it’s like buying lottery tickets. Sure, hit it big for millions and we hear all about it. What we don’t hear about are the millions and millions of others who don’t manage to break even.
the rip off by most of these companies is too much. there should be some form of regulations but not scrapping LP entirely.
It’s sad the cognitive dissonance that people that are pro truck leasing express. I leased a truck twice and lost everything both times. You are not going to win if they control how much you make and when you make it. They control your money through a escrow accounts. They refused to tell you how much is in it or even give you access to it. They will give you unprofitable loads to a freight, dead zone where you will sit for multiple days and make nothing. And I have heard so many stories that after a driver has suffered for years and he is maybe three payments away from ’owning’ the truck and they will tell him to return to the nearest terminal and not give a reason. As soon as he is on the property security will demand that he hand over the keys and empty his truck out because his lease has been terminated. Celadon was famous for doing this to drivers. For anyone reading this I don’t give a damn who you lease from you will lose in the end.