Lease/ Purchasing Good or Bad?

[Streakn1]

When the subject of Lease/Purchasing a truck from a fleet owner comes up on this forum its usually full of horror stories about how the deals went bad.How often have you seen a positve post about this subject.Furthermore,why would anyone want to give someone else part of their hard earned money as commission,plus make the truck payments,etc.That's something to think about.But for some a lease purchase may be the only way they can choose between being a percentage driver or a future owner.Unfortunately,not everyone can walk into a bank and get financing on a new or late model truck.

Are Lease/Purchases risky? They can be and many are. Are there Lease/Purchases out there that are designed for the "buyer" to actually end up owning the truck. Yes, but you have to do your homework in finding one.If you do it the right way and you're willing to pay the extra money, a Lease/Purchase can be the road to success for those with tarnished credit.

We had to look into such a deal when we chose to buy our DR-unit. Most owners were wanting 20% right off the top of the gross revenue to do a lease.This seemed to be standard. In my opinion that was a setup for failure and many we know have failed.We asked one owner several times for a blank copy of their contract for our Lawyer to look over before we signed it.We never got one. If this owner was offering an honest deal why wouldn't they want our Attorney looking their contract over? Thank God we did NOT do business with them! We later learned their "Lease/Purchase" program has a high failure rate.

We did find a fleet owner that was willing to to do an 85/15 lease/purchse with us.At that percentage he was still able to make a reasonable profit for his efforts.Although we were not drivers of his we researched this person for almost a year before doing business with him.Our reseach proved to be correct. He was honest and we now own our truck. In fact we were able to pay it off 16 months early and had no problems when it came time for the title to be signed over to us.

If you are cosidering getting into a lease purchase you should consider the following:
1. Do a thorough check on the person you may be doing business with before signing a contract. Don't rush,take your time.Don't sign just because its a "really good deal". Some "good deals" are conected to "really bad people".
2. Make sure the contract is properly written, TAKE IT TO A LAWYER before you sign.
3.Have an agreement that you will be provided signed financial statements from the owner showing proof of monthly payments made.
4. Have a clause in the contract allowing an early payoff option without penalty.

You can be a success story. It would be nice to hear those more often!

 

[ATeam]

Congratulations!

Thank you for sharing your story. The only thing you left out was the fleet owner's name.

 

[Streakn1]

Patrick Hopkins. A very honest fleet owner along with his brother Tim!

 

[LDB]

The phrase "the exception to the rule" comes to mind. Your successful lease/purchase is that exception. Most go badly and the fleecee is just that, fleeced. There's a reason Dave Ramsey calls vehicle leases fleeces and he's right. You must do a HUGE amount of homework to have a successful lease/purchase. Congratulations on finding one of the few good ones.

Leo Bricker, 73's K5LDB, OOIDA 677319
Owner, Panther trucks 5507, 5508, 5509
Highway Watch Participant, Truckerbuddy
EO Forum Moderator
----------
Support the entire Constitution, not just the parts you like.

 

[greg334]

Leo,
I think that many people have succesful lease/purchases and we don't hear much about them. There is one thing that sticks out in his story - take it to a lawyer. This is something is missed a lot.

With that said, I think that a majority of the lease/purchases are in the regular trucking segement of the industry and are usually with companies that really don't care if the person is successful or not. If they are successful then that's ok otherwise it comes down to a truck rental and the company is the one who makes out.

 

[LDB]

I just don't believe it can be called many. A few go well and perhaps we could stretch it to some go well but to say many go well is being to generous I believe. In the 53' OTR segment I believe there are companies that set it up specifically to fail so they can fleece the same truck several times to several victims and get more than the cost of the truck in payments. Maybe I'm cynical regarding these but I believe the vast majority fail.

Leo Bricker, 73's K5LDB, OOIDA 677319
Owner, Panther trucks 5507, 5508, 5509
Highway Watch Participant, Truckerbuddy
EO Forum Moderator
----------
Support the entire Constitution, not just the parts you like.

 

[kwexpress]

KW Express
o/o till i die

I agree with lbd the majority that are set up by fleets fail.

Prime is one example of a fleet that is screwing people left and right.

Bar nun has a lease purchase that I considerd at one time but decided to just pay cash for a truck I could afford.

it would be nice to have a truck with all the fancy dancy stuff and some reasonable security that when it breaks they will take care of it but at the same time my truck makes me money everytime I drive it
and I can walk away from trucking at anytime sit for a month or two or three tyhen go back to work without having to play catch up.

there is one advantage to lease purchase I like and thats is you can deduct 100% of the lease payments instead of deprication over 5 years
but most do fail.

 

[davekc]

I am no fan of lease purchases as most turn ugly. Hundreds of posts with hundreds of problems. In fact, this is the only positive story on a lease purchase I think I have ever read.
So it may be possible to have a successful one, but I like the odds in Vegas much better.





Davekc
owner
22 years
PantherII
EO moderator

 

[rfrogger120]

For us newbees, give me an example of a good contract, what must be in writing in order to stay afloat as a o/o.

 

[Streakn1]

If I wrote everything here that should be in a "SAFE" lease/purchase contract it would fill an unbelievable amount of space. Our contract was at least 10-pages long. So, heres a condensed version:

To set this up, our truck was bought specifically for our lease.We actually found the truck ourselves and approached our lessor about purchasing the truck and then doing a lease/purchase agreement with us since we could not finance it ourselves at the time.So we knew exactly what the lease holder paid for the truck. Since our lease began the same time his bank loan did,we knew we were paying him back exactly what was owed on the bank loan. We asked for and were allowed to see the actual bank loan contract, which I felt was important. He had a 48-month loan, we had a 48-month lease.

Now, what needs to be on the contract is "NUMBERS". The total price of the vehicle, a breakdown of the monthly payments for the term of the lease/purchse agreement, and the buyout amount (usually $10.00) at completion of the lease period.Next, what is each party responsible for during the agreement, "SPELL IT OUT".The terms of the actual buyout are important to.The expectations of both parties "MUST" be included in the contract such as average monthly revenue required by the lease holder,the payment arrangement of the monthly lease amount,how settlement amounts are to be paid out, escrows,etc. Be specific on the contract."SPELL OUT" reasons why the Lessor or the Lessee can terminate the contract at anytime.Specify the amount of time each party is required to give notice of termination of contract and the terms of surrender on the vehicle.Be sure provisions are provided in the contract that if in the event the Lessor dies,the executor of the estate is required to honor the contract to term, or is willing to make reasonable arrangements to close out the contract with the Lessee.

These are a few of what I believe are important on a contract for me before I would sign. There is much more legal jargon that goes with it.Since I'm not an Attorney I'm in no way trying to give legal advise here, only sharing what I believe is important and how we chose to handle our Lease/Purcase agreement. As I said before "TAKE IT TO AN ATTORNEY" before you sign. Know the strong and weak points of your contract before you sign.If you approach a potentual Lessor that refuses to let you take their contract to your Attorney before you sign, "RUN" as far away as you can,its most likely a "BAD" deal. Please keep in mind, as many have said here before,these are a risky way to buy a truck but if you do it right and both you and the Lessor do what was agreed to in the contract you will be a success story!

 

[ATeam]

Thanks for sharing the contract info. It helps readers understand not just that your lease/purchase worked out successfully but also why. It's not about playing the odds. It's about doing business with people who are as upright and professional as you.

If the odds against a successful lease purchase plan were 100 to 1, it does not matter, as long as you find the 1 fleet owner who does them successfully and you hold up your end. Luck has nothing to do with it. Finding the 1 has everything to do with it.

 

[rfrogger120]

would 85/15 split be about for a lease?

 

[Streakn1]

If you are asking "would 85/15 split be about average for a lease" my answer would be this:

When we were looking to do our Lease/Purchase 80/20 split was the average, 85/15 was all but unheard of.But as the Lessee you need to crunch the numbers of what you feel you can afford in a lease payment ie: truck payment, truck insurance, workmans comp insurance,qual-com,fuel,tolls, maintenance and repairs,household bills,and the cost to feed,cloth and maintain your health,"AFTER" the Lessor gets their cut off the top of your gross earnings! Then you have to know that you will be happy with whats left over.

An example would be taking an average yearly gross of say $190,000 on a DR-unit in a 80/20 splt lease, your giving the Lessor $38,000/yr free and clear.If that same lease was an 85/15 split, then your giving up $28,500/yr. That's $9,500 difference in your favor. That could be your maintenance escrow,etc!Then figure the interest rate on the Lessors bank loan,afterall your paying that to in the lease payment. Combine the two and that's the total interest you are paying on the truck. So the key is to find an honest fleet owner that has the ability to get "LOW" interest financing and keep the total interest you pay right around 20%.

If given a choice of having to borrow from a high interest fly by night loan company verses paying an honest individual 15% to use their credit line, personally I prefer to help the individual that was willing to help us.

Phil,
What you said was very powerful and very well presented! Thankyou.

 

[guest]

I'm glad you got to own your own truck, Tim and Pat hopkins are good guys and very honest.


Drive Safe
David Mayfield

 

[Streakn1]

Dave,
Thanks for your post here regarding Pat and Tim Hopkins.After a very BAD experiance as percentage drivers with our first fleet owner, you can bet we felt very lucky to find Pat. You may remember the thread
"Honest/Dishonest Fleet Owners" I posted a while back.

We have always appreciated the good things you've said about the Hopkins. In our book they have proven to be honest folk to do business with.

Your post on this forum have helped us along the way and are greatly appreciated. Hope to continue reading more of what you have to offer.