Understanding Lease Purchase Trucking ProgramsMarch 23, 2023
Lease purchase programs have developed a reputation for being the trucking equivalent of The Good, the Bad, and the Ugly over the past few years. While they offer a lower barrier to entry than going to a dealership, many programs are a double-edged sword that can quickly turn an owner operator’s dream into a nightmare.
Like any business decision, the process of choosing a lease purchase trucking program should be done with clear eyes, an open mind, and an understanding of the potential pitfalls that might be right around the corner. At the end of the day, we want you to have the best information available so that you can make the business decision that fits your needs and goals as an owner operator.
5 Things to Consider When Evaluating Lease Purchase Programs
The truth is that not all lease purchase programs are created equally, and they should each be evaluated based on objective criteria. Here five things to consider before choosing your lease purchase provider.
1. Program Success
Before we get into the meat of the conversation, one of the first questions that you should ask every lease purchase program is their track record of success. There is an enormous difference in a 1% completion rate versus 50% or higher.
Success isn’t entirely dependent on the carrier, or provider, but it can be an early indicator of support networks, quality of equipment, and a properly structured financial plan for program participants. Before asking what kind of equipment someone offers, don’t be afraid to ask how successful their drivers are and how likely they are to complete the program. It can be more telling than you might realize.
2. Qualification Process
Step foot in any dealership, and you can expect a 10% to 20% down payment, assuming you have good credit. That is a major hurdle for owner operators that are just getting started. One of the biggest reasons lease purchase programs have exploded in popularity over the last few years is because they break down these traditional barriers and create a streamlined Path To Ownership.
Take stock of the qualifications for each provider to ensure that you find the program that is most suitable for you and your business. Don’t jump at the first opportunity, this is one time where doing your homework will pay off in the long run.
3. Financing and Terms
If the dollars don’t make sense, you will be behind the eight ball from day one. Many programs get you in the door with the no money down hook, but then gloss over all the nuts and bolts of the lease purchase program.
Most will provide base details such as weekly payments, length of term, and end of lease options. Very few are willing to pull back the curtain and show you the numbers that actually impact the likelihood of success within the program.
As you dig into the numbers be sure to ask for details on the cost of funds (interest rate or fees), example amortization schedules, and the total cost of the vehicle (including markups). You need to look at total cost of ownership and if you are building equity and creating wealth. Don’t be afraid to walk away from a deal if these basic questions are not answered with transparency.
4. Equipment Selection
Truck preference is like picking a flavor of ice cream, each fleet owner has their favorite and we aren’t here to convince you that Peterbilts are better than Freightliners or Volvos or vice versa. What is important to note as you get deeper into the decision-making process is separating out programs that offer good versus bad or new versus used worn out equipment.
Used equipment in the lease purchase trucking world should be properly evaluated under a microscope. Many vehicles are older fleet vehicles that carriers are looking to offload without fully refurbishing or repairing properly. Although they might come with a lower price tag, repairs and downtime could quickly add up, offsetting any price benefit.
Leveraging new equipment and or fully refurbished equipment helps to stack the deck in your favor. Not only is newer equipment more reliable, but they are also backed by warranties that prevent you from being on the hook when repairs are needed.
5. Ongoing Support
Ongoing support can easily be an afterthought. In truth, it should be a top priority for every person thinking about entering a lease purchase agreement. Having a network in place to help you when the chips are down can be the difference in success or failure.
As you explore options, ask about any maintenance programs, deferment process, vendor network, and additional services (or discounts) with a fine-toothed comb. Some program providers are more hands on than others and having a support network is critical for business success.
Path To Ownership With ES
ES goes to great lengths to make sure we check every box to help you be successful. We look at several factors before extending an invitation into our lease purchase program. We value attitude, aptitude, work ethic, and work history. We make sure it is a good fit for everyone. Our goal is help LIFT up your business. Connect with our team online or by phone at (877) 349-9303, option 4 and learn why with ES in your corner, you will Never Stand Alone.