COVID turned the economy into a roller coaster experience. Many people and companies have suffered immensely. The demand for trucking services, however, has continued to expand. People need products, and trucks deliver many of those needed products.

The number of new carrier registrations in the last twelve months spiked significantly compared to historical averages. Many of those registrations were owner-operators. 

For those considering becoming an owner-operator, this recent post on getting your own authority vs leasing on provides lots of valuable information. 

Owner-Operators have lots of options. Some prefer to work completely on an independent basis and others like the stability of leasing on with a carrier. There are pro‚Äôs and con‚Äôs with each option. 

If you are thinking of leasing with a carrier, there are some important things to think about. (Note: The term "lease" as used in this post refers to services offered, hauling loads for a carrier, not a financial transaction for equipment.) 

This is not news to you‚Ķ you already know it, but it is a reminder that needs to be said: not all carriers are the same. Not all contractual agreements are the same. So, even if leasing with a carrier makes sense, that does not mean any carrier will do. You must do your due diligence. 

And since contractual agreements vary, we cannot say all carriers will offer the services described below. Some will. Some won't. 

Each owner-operator's situation is unique. There is no one size fits all. 

But, for some owner-operators, it makes sense to lease with a high-quality carrier. 

What to Consider When Deciding Whether to Get Your Own Authority

This is a business decision. There are many reasons why owner-operators prefer not to lease on with a carrier. 

If‚Ķ 

• Finding loads at good rates when and where you want to go is not an issue
• Doing the back-end office functions is simple and done within deadlines
• You have time to manage the business as well as drive the miles
• Getting paid on time is not a problem
• You prefer to do everything on your own without any help from others

Then leasing with a carrier is unlikely to be an attractive option.  

If, however, you want to have the flexibility of running your own business with the help of other professionals, then leasing is something to consider. 

The Advantages of Leasing On 

The most important reasons owner-operators lease onto a carrier are:

• Payment stability
• The business it brings
• Administrative support
• Savings on things like fuel

Getting paid on time can be a challenge. See our post on factoring for more thoughts on this. 

Load boards abound. Sometimes, especially in a hot market, they provide all the business needed. But volumes go up and down. Carriers often have a book of business that is available to tap into. If not, a carrier generally has a longer track record and reputation. That can be valuable when securing business. Either way, being part of a larger carrier often opens up opportunities that an owner-operator cannot secure alone. 

Dispatch related tasks are time consuming. Billing is extremely important and takes time (and, often, more time). IFTA filings --fun (not). These are the types of administrative support services that must be done, and can be done by the carrier. (Again, the contract should specify what each party will do.)  

Discount programs the carrier has negotiated can save serious money on things like fuel, tires, maintenance, and business-related insurance. With some carriers you can even get discounts on health insurance, travel (hotels), and other things like cell phone services. These discounts should be considered when calculating the costs the carrier charges since they decrease the overall cost of leasing. 

The Disadvantages of Leasing On

Nothing comes for free. That is the main disadvantage. You make less per load since a portion of the rate goes to the carrier. 

The carrier charges for the services offered. That charge varies by carrier – as do the services the carrier provides. Whether the negative impact of those charges is offset by the positive aspects of working with the carrier usually determines whether leasing with the carrier makes sense.

For some owner-operators, the idea of being totally independent is more important than any cost considerations. It is common for a carrier to require the owner-operator to only haul for the carrier during the term of the lease. The length of the lease term limits pursuing different business opportunities. 

Choosing A Carrier   

If the carrier option makes sense for you, the next step is figure out which one. 

Reputation

A carrier's reputation is a critical factor. When leased to the carrier, their reputation can help you get loads, or hinder you. Talking with other owner-operators, especially those who've worked with the carrier, is one of the best ways to find out what the carrier's reputation really is. Anyone can put up a fancy website. The day-to-day operations is what impacts your business. 

Many shippers take into consideration a carrier's safety performance. Leasing with a carrier that has above average performance can lead to more business. Shippers are concerned about lawsuits related to carrier performance. If a shipper uses a carrier with suspect safety performance, and there is a problem (e.g., accident) with a load that carrier hauls for the shipper, that can be used against the shipper in a lawsuit. 

Anyone can check on a carrier's safety performance (along with other key items). You can also on the FMCSA Safer website. For comparison purposes, you can see the safety numbers for TrueNorth Safety Rating and OOS Rate. Carriers with ratings better than the national averages are recommended. 

     “I lost four drivers because of the DOT number at my previous company. They got denied loads because of their reputation.”    

— Mike T.

 Company Drivers

There is nothing wrong per se with a carrier leasing on owner-operators and employing company drivers. But if the company drivers get preference on load selection, or the dispatchers favor them, then that is a problem. 

Flexibility

Scheduling flexibility is another important area. Some companies force dispatch, others don't. But even when they don't, what is offered might not be desirable. Or taking time off to be home for important events may not be possible. Some drivers prefer to have greater control over getting business and selecting their loads. If you are like that, does the carrier allow or encourage that? 

     “I've been off for a week and a half, and no one's called me to pester me [at TrueNorth]. You get the freedom to do what you want to do.”    

— Kelly B.

 Services

You know the challenges of getting paid when running independently. How does the carrier work to make that part of the business better? Some carriers offer faster payments and eliminate the need for factoring.  Some are able to free up your time and reduce the headaches caused by paperwork and filings.

What other services or benefits does the carrier offer? What kinds of discounts do they have on fuel, tires, and maintenance and repair?

Restrictions on Equipment, Lanes and Freight

Sometimes things that are basic are overlooked. (Common sense is among the most uncommon of senses.) Is there alignment on very basic things, such as:

• Does the carrier operate in the areas of the country you want to haul?
• What type of freight do they haul?
• Do they have the authority to do intrastate shipments or just interstate?
• Does your current experience and equipment meet the carrier' requirements? Or will you need more training or additional equipment?

The list could go on -- if you haul flatbed loads, or Texas intrastate shipments, or shipments in California, or no shipments in California, or (fill in the blank) -- then you need a carrier that has similar desires. 

Fees

Then, finally but not last or least, is the rate the carrier will charge. This needs to be reasonable based on the services the carrier is providing. If the services are needed and done right, then this will benefit you and help you spend more time making money on the road. 

And all the rates need to be clearly identified. Some carriers just charge a percentage of the load. That is clear and clean. Many carriers, however, have other charges added on a weekly or monthly basis. Dispatch, administrative, etc. These additional charges can be due even when not hauling freight. If the carrier is not transparent on all charges, find another carrier. 

Finally, you need to be paid. When will that be? The carrier should spell it out. The sooner, the better. Once the work is done, there should be no need for you to wait 30 (or more) days to get paid. 

A Final Caution  

The contract between the owner-operator and the carrier needs to be reviewed carefully. There is no standard industry contract. Contract terms vary: responsibilities, length of term, charges for services, termination process, etc. are different for each carrier. 

Know what you are signing. Does the carrier require a long-term contract or is the carrier confident that you will want to stick around and offers an easy way to exit the contract if you are not satisfied? 

Get legal advice if needed; it is usually recommended.