Seeing Red? 4 Red Flags of Traditional Lease Purchase Programs
Whether you are already an owner-operator or fleet owner and are looking to add equipment, or you are a driver looking to make the leap to being an owner-operator, you undoubtedly have a big decision to make. It is safe to assume that if you are reading this, you are probably exploring traditional lease purchase programs as they offer a low barrier to entry and immediate access to a truck.
Before you jump into a lease purchase agreement, explore all your options. Along the way, ask the hard questions because at the end of the day, it is your business, and a decision of this magnitude deserves due diligence.
The fact is that there are a number of different programs in the marketplace to choose from, some of which could be the right fit for you and your business. Sadly, there are also programs that do not place the operator’s interest above their own and navigating the potential traps has become more difficult in recent years.
As you evaluate different programs keep in mind these potential red flags.
4 Red Flags of Traditional Lease Purchase Programs
On the surface there are several benefits to purchasing older equipment. Lower overall cost, lower insurance premiums, and a shorter term are frequently the biggest selling points. However, older equipment may have more frequent repairs and higher maintenance costs associated with ownership. New, late-model and fully refurbished equipment is backed by a warranty and is much less likely to spend time in the shop. If your truck is constantly broken, it can turn your business upside down quickly.
Additionally, many traditional lease purchase programs were built as a way for motor carriers to offload older fleet equipment. Instead of selling equipment back to the dealership, they make a better profit margin by putting it in their lease purchase fleet.
$0 down programs aren’t difficult to find in the lease purchase world. The idea behind most is to reduce traditional barriers like a steep down payment and the need for a high credit rating. Keep in mind that all lease purchase companies are in the business of making money. Many traditional lease purchase providers recoup the money that would be paid as a down payment through over-inflated truck values and additional fees.
It is important to remember that $0 down is only applicable on the front end of the lease. The backend could look very different with excessive balloon payments and few – if any – options to finance the remainder owed.
As you do your research, don’t be afraid to walk away from a program that refuses to pull back the curtain and give you all the financial details that you need to make an informed decision.
Lack of Support
There is no ‘I’ in owner-operator or fleet owner. Having a support network in place when you’re new to owning a truck or something doesn’t go as expected is a must, but the industry is littered with LP programs that offer little to no external support for their community.
If you are unsure of the questions to ask, simply reach out to the operators that are part of each LP provider’s community. If a program will not provide references within their own fleet of operators, that should be considered a major warning flag.
Undefined Path to Success
How do you know you will be successful in a lease purchase program? For many operators, entering a lease purchase program is a leap of faith. They assume they will get enough miles to pay their weekly truck note. While hope can sometimes move mountains, it might not keep your business running for long or put food on the table, much less pay for braces, college, or your daughter’s wedding.
Take the time to find a lease purchase provider that works with you to ensure that you can succeed in their program. Few things are worse than agreeing to a high truck payment only to find out that you cannot generate enough miles to stay above water. Having a well-defined roadmap will help you prepare for the transition from driver to owner-operator, or owner-operator to fleet owner.
Success in Trucking With ES
ES matches owner-operators in the ES Community with the motor carrier partner that best fits the goals for your business. At ES, our goal is to provide a well-defined roadmap that is transparent, backed by a great support network, with the best equipment available to help you find your Success in Trucking.
To learn more about the ES Lease Purchase Program, connect with our recruiting team now or call us at (877) 349-9303, option 4.