As an Owner-Operator, you can choose one of two pathways for your trucking business: 1) Lease on with a carrier or 2) Run under your own operating authority.

How do you know which one to choose? Both options carry their respective pros and cons, but ultimately, it comes down to your preference. Let's take a look at each one so that you can decide which route is right for you.

Option 1: Lease With a Carrier

Leasing onto a carrier can be a wonderful way to earn great profits and maintain the freedom you enjoy as an Owner-Operator. The relationship between you and the company is also known as "leasing on".

When you lease on, you enter into an agreement (contract) with the carrier - or trucking company - to haul freight under their authority. This means that you operate under their motor carrier number, insurance, and terms. It's important to note that contract terms vary when it comes to responsibilities, length of term, charges for services, termination process.

In most cases, as an Owner-Operator, you provide the truck needed to haul the freight. Additionally, depending on the carrier, you have the ability to choose whether you are self-dispatch or use that of the company.

How fleets operate varies greatly, and it's important to do the research to understand what exactly the lease will mean for you.

Below is a summary of the pros and cons of each option. Let's then look at the most common pros and cons with more detail.

Pro #1 - Enter into a turnkey business

It can take months to set up and launch your business under your own authority. When you lease to a carrier, that carrier is an established company. It already has the authority to operate. No need to file paperwork with the FMCSA. You can enter into the agreement and begin hauling freight much more quickly.

Pro #2 - Pay lower operating costs

When you lease onto a company, you get to take advantage of established systems, processes, networks, and more. This includes things like discounts for a lot of overhead expenses - liability insurance, fuel, and tires.

Let's take fuel as an example. Fuel is your biggest overhead cost, especially in today's market. Many carriers are able to offer cost-plus discounts when you buy fuel in their fuel network.

You put a lot of miles on your truck and it's vital to your business to keep your equipment in top shape. When you lease with a carrier, you can benefit from their maintenance network. Many of the larger carriers have their own maintenance shops at operating centers across the country. The cost of tires is also a large operating expense. Many carriers work with a network of tire banks where you get discounted prices.

Pro #3 - Get paid more quickly

There is no question that getting paid can be a pain point in the trucking world. Many shippers often take a minimum of 30 days to pay off your invoices. Sometimes, it can be even longer - 60, 90 or 120 days. When you lease on with a carrier, payment is regular, stable, and predictable. You typically get paid weekly, regardless of the shipper's timing. There's no need for factoring which can cost 2-4% of your gross.

Pro #4 - Receive back-office support

As an Owner-Operator who runs your own business, there is so much value to backend support. This type of support can help relieve you of all of the requirements and tasks that take you away from doing what you love most - driving. A carrier takes care of the billing and paperwork, including helping with filing IFTA taxes, purchasing state permits, and managing CSA safety scores.

Con #1 - Pay a high fee

All of this support comes at a cost. Trucking companies charge a service fee in the form of a set percentage of your gross revenue. Some carriers charge as high as 35%.

Con #2 - Fleet sets the terms

The fleet's terms may or may not work for you. For example, some fleets force dispatch or limit the loads you get. You may not be able to haul flatbed or reefer, because the fleet's insurance doesn't cover that equipment. It really depends on what is in the lease agreement with that trucking company.

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Now that we've looked into our first option of leasing onto a carrier, let's switch gears to the second option of running under your own authority.

Option 2: Your Own Operating Authority

When you run under your own authority, you are an independent motor carrier. You have your own motor carrier (MC) number, insurance, safety scores - everything. You must have your own truck at a minimum and preferably your own trailer if you can afford it. As your own carrier, you'll be responsible for paperwork, fil

Pro #1 - Retain higher profits

When you have your own authority, you don't pay the same service fee as you would leasing onto a carrier. You get to keep close to 100% of your gross revenue. However, you may have to pay for load boards - in which case, you would typically pay a small monthly fee - or fees to get your money faster, such as factoring or Quick Pay.

Pro #2 - Control your schedule

As a carrier, you have complete control over your business. You set all of the terms of how you operate -- your hours, where you haul, hometime, and more.

Con #1 - Higher set-up and operating costs

The law requires an owner-operator with authority to carry liability insurance with a minimum coverage of $750,000, and most shippers and brokers require $1,000,000. If you haul hazmat, you'll need $5,000,000 coverage. You'll also need other types of insurance, such as cargo insurance. As a new authority, insurance premiums are even higher and often require a down payment. Other operating costs include registration, inspections, HVUT, IFTA and more.

It is always possible to establish and negotiate partnerships with fuel stations, maintenance shops, and more, which of course takes time, effort, and expertise to do.

Similarly, many of the back-office tasks that come with having your authority take time, effort, and expertise to do. This takes time away from hauling freight. In addition, there may be a big learning curve. Some of the main requirements include:

• International Fuel Tax Agreement (IFTA) reports
• Billing
• Bookkeeping
• Registrations and permits

Con #2 - More effort to find freight

Your success hinges on your ability to move freight. How you do this depends on your desire and capacity. Your options include:

• Search, bid and negotiate loads on load boards.
• Establish relationships with shippers and set up regular service or dedicated lanes which often takes time
• Use a freight broker. A freight broker is a professional who can do the leg work of finding freight demand, negotiating rates, setting pickup and delivery appointments. Brokers typically keep 15-25% of the profits.

As a new authority, you have the added hurdle of finding brokers who will work with you. Most brokers require that you have had an active authority for at least 90 or up to 180 days.

Con #3 - You literally do everything

As your own carrier, you're no longer just finding freight and driving the truck. You're doing all the paperwork, chasing down invoices, calculating IFTA, preparing quarterly taxes, staying compliant with DOT, managing your safety scores -- the list goes on.

The good news is that there are now many technology solutions that help carriers efficiently manage the day-to-day aspects of running a business for a small fee, which can free up your time to focus on keeping those wheels turning and growing your revenue.

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Summary

So there we have it! Two options for your Owner-Operator business. Neither is right or wrong, it solely depends on your preferences and business skills. Sometimes it's all about finding the right company to lease onto.

Summary of the Pros and Cons of Leasing On vs. Your Own Authority

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Signing Up With TrueNorth

TrueNorth was founded on the principle that Owner-Ops should be able to keep the lion's share of the profits. We support whether you are leasing onto another carrier or running under your own authority, we hope you'll consider joining our platform! Here are a few of the benefits you'll experience with either option -

• Search loads from the largest load sources all in one load board
• Have you peace of mind knowing that TrueNorth filters out brokers known to not pay
• Identify brokers who will work with new authorities
• Manage your loads, documents and revenue all from a single app
• Have your documents sent directly to your factoring company
• Access fuel discounts of up to $1.50/gallon at major truckstops nationwide

Other relevant articles:

Choosing a Carrier as an Owner-Operator

Choosing the Right Structure for your Owner-Operator Business

How to Become and Owner-Operator without Going Broke

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