Owner/Operator Questions

[Richard Ramirez]

I've been driving for a few decades now. Having been solely in the LTL industry and almost all with Conway, except 3 years when I first started my driving career. Has anyone been succesful in becoming an owner/operator and staying semi-local? I would like some honest opinions and if this could be possible and if so the possible income? I wouldn't mind 1 or 2 nights a week staying over somewhere. One of my concerns are benefits, since that's a major cost.

[JLKKLJ777]

Unless you have the cash to buy a truck outright or put a substantial downpayment on 1 then I would avoid this plan. The interest rate alone is usually in the high teens on truck loans (depends upon your credit rating and downpaymnet).
Many aspiring o/o's decide to try a "lease purchase" (aka fleece deal) to try and get their foot in the door.
As you already seem to be aware the biggest change seems to be in the benefits end.
As an independant contractor you become responsible for all the social security tax (as an employee your employer pays half then you pay the other half) which is 15.30 % of your earnings. Then you are responsible for filing and paying estimated quarterly payments to the IRS. State, local, road use, fuel tax, and 2290 tax, are all your responsibility (unless the company you lease to agrees to file these for you). In lieu of workers comp insurance there is also occupational accident insurance you should have. Bobtail insurance and unladen insurance will be necessary as well.
All maintenance issues such as breakdowns, pm's, oil, anti freeze, windshield washer fluid, anti gel products, etc are all going to come out of your pocket as an o/o.
Forget about low cost medical, dental, vision, disability, life, 401k, paid vacations, sick days, personal days, breakdown pay, layover pay, etc as well.
We have not even talked about the cost of the fuel yet which seems to be running about $3.30 per gallon. Older trucks will average between 6 to 6.5 mpg.
If an o/o averaged 2500 "paid" miles per week for 52 weeks this would result in 130,000 miles. If you get 6.5 mpg for these miles this equates to 20,000 gallons over the course of a year. If you pay the average pump price of $3.30 per gallon you will pay $66,000.00 in fuel alone. Lease payments for a truck will be around 500.00 per week (some will be a little less some may be much more ex primes weekly lease cost for a new truck is around $750.00). Now remember these payments are due EVERY week for a total cost of $26,000.00 for a year. This means if you take a week off your already in the hole financially.
The average otr truckload carrier is advertising about .90 cpm for all miles. They do offer a fuel surcharge but may not pass the full amount onto the o/o (there is no law requiring a 100% pass thru for this and many carriers will skim a chunk off of the top for themselves). Lets be generous though and say you do get a 100% pass thru. With a fuel surcharge of .35 cpm added to . 90 cpm will equate to $1.25 per mile. For 130,000 "paid miles" per year will equal to $162,500.00 to the truck. Now deduct the lease cost and you are down to $136,000.00. Now deduct the cost of fuel you are down to $70,000.00. The normal and customary maintenance fund is about .08 cpm and over the course of a year will equate to about $10,000.00 (we will assume this will cover any breakdowns, tires, pm's, oil, coolant, washer fluid, etc) so now your down to $60,000. There will be idle time and "unproductive miles" that will drop this amount even further. The normal variance between paid miles and unpaid (wether measured by Pc Miler or Rand Mcnally) miles are usually around 5%. Over the course of a year this will be about 6500 additional miles at 6.5 mpg will equate to an additional $3030.00 in fuel costs. Now add in idle time of about 4 hours per week worked for a total of 208 idle hours at .75 gallon per hour equates to 156 gallons of fuel at 3.30 per gallon for 514.80 for a total of 3544.80. Now that 60 grand is down to $56455.20
Now deduct your bobtail insurance at about 40 per week, Occupational insurance for 120 per month, and physical damage at 300 per month gives a total of $5520.00 per year drops your earnings down to $50,935.20.
If you want to have medical, dental, vision insurance for your family then figure on about 750.00 per month for this. The cost of thses equates to about $9000.00 so your profit after all this is $41,935.20. If you used all the remainder as your salary you would still have your fica, medicare, state, and local taxes.
Figure about 28% tax rate and you will be obligated to pay $11,742.00 in taxes. So you have a net income after all this of around $30,193.20.
Many people opt to become independent businessmen believing they will make buckets of money. As you can see from the above it aint all its cracked up to be. Most drivers who attempt to go out on their own do in fact fail. If you elect to go this route please check in periodically and report to the rest of us how you are doing. Many may be able to learn from your example.

[Richard Ramirez]

Originally Posted by JLKKLJ777

Unless you have the cash to buy a truck outright or put a substantial downpayment on 1 then I would avoid this plan. The interest rate alone is usually in the high teens on truck loans (depends upon your credit rating and downpaymnet).
Many aspiring o/o's decide to try a "lease purchase" (aka fleece deal) to try and get their foot in the door.
As you already seem to be aware the biggest change seems to be in the benefits end.
As an independant contractor you become responsible for all the social security tax (as an employee your employer pays half then you pay the other half) which is 15.30 % of your earnings. Then you are responsible for filing and paying estimated quarterly payments to the IRS. State, local, road use, fuel tax, and 2290 tax, are all your responsibility (unless the company you lease to agrees to file these for you). In lieu of workers comp insurance there is also occupational accident insurance you should have. Bobtail insurance and unladen insurance will be necessary as well.
All maintenance issues such as breakdowns, pm's, oil, anti freeze, windshield washer fluid, anti gel products, etc are all going to come out of your pocket as an o/o.
Forget about low cost medical, dental, vision, disability, life, 401k, paid vacations, sick days, personal days, breakdown pay, layover pay, etc as well.
We have not even talked about the cost of the fuel yet which seems to be running about $3.30 per gallon. Older trucks will average between 6 to 6.5 mpg.
If an o/o averaged 2500 "paid" miles per week for 52 weeks this would result in 130,000 miles. If you get 6.5 mpg for these miles this equates to 20,000 gallons over the course of a year. If you pay the average pump price of $3.30 per gallon you will pay $66,000.00 in fuel alone. Lease payments for a truck will be around 500.00 per week (some will be a little less some may be much more ex primes weekly lease cost for a new truck is around $750.00). Now remember these payments are due EVERY week for a total cost of $26,000.00 for a year. This means if you take a week off your already in the hole financially.
The average otr truckload carrier is advertising about .90 cpm for all miles. They do offer a fuel surcharge but may not pass the full amount onto the o/o (there is no law requiring a 100% pass thru for this and many carriers will skim a chunk off of the top for themselves). Lets be generous though and say you do get a 100% pass thru. With a fuel surcharge of .35 cpm added to . 90 cpm will equate to $1.25 per mile. For 130,000 "paid miles" per year will equal to $162,500.00 to the truck. Now deduct the lease cost and you are down to $136,000.00. Now deduct the cost of fuel you are down to $70,000.00. The normal and customary maintenance fund is about .08 cpm and over the course of a year will equate to about $10,000.00 (we will assume this will cover any breakdowns, tires, pm's, oil, coolant, washer fluid, etc) so now your down to $60,000. There will be idle time and "unproductive miles" that will drop this amount even further. The normal variance between paid miles and unpaid (wether measured by Pc Miler or Rand Mcnally) miles are usually around 5%. Over the course of a year this will be about 6500 additional miles at 6.5 mpg will equate to an additional $3030.00 in fuel costs. Now add in idle time of about 4 hours per week worked for a total of 208 idle hours at .75 gallon per hour equates to 156 gallons of fuel at 3.30 per gallon for 514.80 for a total of 3544.80. Now that 60 grand is down to $56455.20
Now deduct your bobtail insurance at about 40 per week, Occupational insurance for 120 per month, and physical damage at 300 per month gives a total of $5520.00 per year drops your earnings down to $50,935.20.
If you want to have medical, dental, vision insurance for your family then figure on about 750.00 per month for this. The cost of thses equates to about $9000.00 so your profit after all this is $41,935.20. If you used all the remainder as your salary you would still have your fica, medicare, state, and local taxes.
Figure about 28% tax rate and you will be obligated to pay $11,742.00 in taxes. So you have a net income after all this of around $30,193.20.
Many people opt to become independent businessmen believing they will make buckets of money. As you can see from the above it aint all its cracked up to be. Most drivers who attempt to go out on their own do in fact fail. If you elect to go this route please check in periodically and report to the rest of us how you are doing. Many may be able to learn from your example.

Someone has too be making money, it's just a rule.

[stldude44]

I have a brother who's an O/O and he'll never tell me his cost per mile....he says he has no interest in knowing it. I don't ask anymore but it's a figure I would think all O/O's would need to know. I'm sure his accountant tells him but he would never tell me because then we'd see that his becoming an O/O wasn't a good idea. I discouraged him from buying a truck years ago when he did it. He's been through almost 20 companies and they all lie about miles, bonuses, etc. JLKK's figures are probably very accurate. Stay away from buying a truck.

[Jeff]

Thats a damn good well thought out post, thanks

[Dirtball]

I was never a true O/O but I acted as one thru proxy. It didn't work out so please don't ask. Anyway My Brother-in-law was an O/O thru a lease purchase program. He started out with Daily Express out of Carlisle Pa and wound up putting the truck on with Keen Transportation out of Carlissle pa. He always bragged about how much more money he made as an O/O than I as a company driver. The one thing I could never understand though was why he would always asked me to lend him money. Seemed like it was on a weekly basis. In the end he lost everything..Good advise from other posters here stay away from buying one..