Could someone explain this math to me?

[rigidsporty]

I am a local driver and get paid hourly, but the company I work for (Jacobson Transportation) pays their owner/operators $0.93 per mile.

Lets say (for the sake of argument) that the truck payment is $1300 a month, insurance is $12,000 a year (worst case senario), fuel is $4 a gallon (a very conservative number), your getting 6 mpg, and your running 12,000 miles a month...

Your gross income would be $11,160.

Fuel would run you about $8000, truck payment is $1300, insurance is $1000. Just those three expenses run you $10,300. Yes I know there are a lot more, but thets just focus on those three.

That leaves $860 a month gross.

My question is... thousands of people do this everyday... figuring in taxes, paying yourself, running costs, depreciation, and a dozen other things... how in the HELL do they make it???

I am very interested in purchasing a truck, but my calculator tells me that would be a major mistake... what am I missing? (Smart-asses need not reply)

[Orangetxguy]

I am a local driver and get paid hourly, but the company I work for (Jacobson Transportation) pays their owner/operators $0.93 per mile.

Lets say (for the sake of argument) that the truck payment is $1300 a month, insurance is $12,000 a year (worst case senario), fuel is $4 a gallon (a very conservative number), your getting 6 mpg, and your running 12,000 miles a month...

Your gross income would be $11,160.

Fuel would run you about $8000, truck payment is $1300, insurance is $1000. Just those three expenses run you $10,300. Yes I know there are a lot more, but thets just focus on those three.

That leaves $860 a month gross.

My question is... thousands of people do this everyday... figuring in taxes, paying yourself, running costs, depreciation, and a dozen other things... how in the HELL do they make it???

I am very interested in purchasing a truck, but my calculator tells me that would be a major mistake... what am I missing? (Smart-asses need not reply)

Your forgetting the FSC..load / unload pay, plus whatever other accessories they may pay.

I still wouldn't run for that low a rate.

[Drew10]

That .93cpm, would not include the Fuel Surcharge.

[Bigmon]

At .93 you wouldn't need to worry about taxes either. It would be easy for an accountant to squash 860 per month. I think 12k for ins. is high. As a rookie I'm being quoted 6-7k.

[BanditsCousin]

I pay 760/mo for insurance on my truck, workman's comp, and pl/pd. I'd expect an avg freight hauler to be less.

But, the OP has the right idea with where he's going with this...

[GMAN]

Rigidsporty, the only way some of these owner operators make it is their fuel surcharge. Some carriers pass the entire fsc through to the owner operators, others do not. Some carriers also offer some sort of fuel discount program. Frankly, I don't see how most of them make it, either. I have looked at the numbers for years and most owner operators who work for mileage pay would make as much and often more if they drove a company truck. Mileage rates for owner operators have not changed, to any degree, in decades. If I were planning on buying a truck and leasing it to a carrier, I would look for one who pays percentage of the line haul rate. It is more equitable. You may or may not do better, depending on your business skills in managing your business. But the opportunity is there to do better. Running percentage is a bit more challenging than mileage. With percentage you have the opportunity to seek out the better paying loads and make more money. With mileage, it really doesn't make any difference where you run since the rate is the same.

[heavyhaulerss]

I am very interested in purchasing a truck, but my calculator tells me that would be a major mistake... what am I missing? (Smart-asses need not reply)

your not missing as much as a lot of other drivers I have run into over the years. why ? because your looking, noticing & asking questions. as I did 10 years ago when I gotinto trucking as a o/o. everything was different then. however the basic principles still apply.

many truckers are like so many in home foreclosure... champagne taste on a beer budget, had to have a house, car & furnishing they could not afford because they saw so many other people doing it. they either felt insecure or let their common sense go. cause when it's all over, most all will tell you.. they knew better. when I first started, I bought an ole walmart cabover for $15,000 cash. it had 400,000 miles on it. I ran with 14 other o/o's. they all ridiculed me for not buying a hood.

although hoods of the same year with 600,000 miles were going for more than twice the price I paid for mine. but that was when fuel was low & freight was abundandt. it was not long after that that things started to change. by 2000-2001 I have watched all the regulars with the high priced chrome lose it all.

when things were going well, they though it would never end & lots of them bought things & financed things they could afford only if everything stayed the same. witch by history's lesson... never do.
I operated as if that day would be my last load & last paycheck ( so to speak)there are still great opportunities in trucking. you have to have a good plan & stick to it. do not reward yourself with high priced chrome out of insecurity. reward yourself with peace of mind, with is priceless.

figure out how & where you want to run before you decide what you want to buy. dont want to go over the road & be gone for3-6 weeks at a time?? then dont get a high priced truck that requires you to have to do so. when I pulled up to unload , I would make the same for that load as the guy in front of me with the high truck payment. though I did not have the bragging rights of a real nice looking truck. I had peace of mind. the nice trucks are fine, but just like a first car or even a first home .. it is or should be something you can afford & then trade up later on when your experiece & financial level increases.


my refernce here is refering to my particulair experience witch was & is in northern al area & pulling flatbed.

find what can & will work for you in trucing.. wish you the best of luck.

[rigidsporty]

I dont have a clue what insurance will run, I just read on here once someone saying they were quoted that, so thats the number I used.

Jacobson says they pay 100% surcharge, but they dont say how much. What is the average?

[GMAN]

It doesn't matter where you live, heavyhaulerss, it is sound advise. Don't go for the expensive truck. Start with something you can afford. It is a great feeling to have a paid off truck or one with a small payment. It helps you concentrate on making money and running your business rather than having to worry about making those big truck payments.

[heavyhaulerss]

I dont have a clue what insurance will run

I am not sure about the type ins you would need or want. I can tell you I am leased to a co, that pays ins. I just pay bobtail ins. it has been this way ever since ive been in trucking. my ins on truck & trailer including bobtail is 73.00 a month thru groh ins in dover ohio. thats another plus about having a less expensive truck. less cost for ins. same principle as a car in that reguard.

[Red Clay Rambler]

rigidsporty,

Your insurance estimate sounds like the cost for an O/O with his own authority. If you lease to a carrier, your insurance cost would likely be less than 200.00 per month, sometimes less than 100.00 per month.

[NotSteve]

I have my own authority, truck and trailer and total insurance cost is $5,500 per year.

[GMAN]

I dont have a clue what insurance will run, I just read on here once someone saying they were quoted that, so thats the number I used.

Jacobson says they pay 100% surcharge, but they dont say how much. What is the average?

If you plan on leasing to a carrier they should take care of the liability and cargo insurance. That is rather expensive. The only insurance you are responsible for is either bobtail or unladen liability, depending on the carrier. Most require bobtail. In addition, you may want or need to have collision to protect your truck. I think the last quote I had on bobtail insurance was about $60/month. Some carriers may offer that insurance for as little as $45/month. Collision is not required by most carriers. Most lenders will require you to have collision, if you finance your truck. The cost usually runs between 2 1/2-4% of the stated value of the equipment. The more you pay for the truck, the higher the premium.

If you want to get your own authority, then you can expect to pay some fairly high premiums, to start. Rates will vary based upon your driving record, experience, where you run and live. Some have had to pay premiums in excess of $12,000. A friend of mine got his authority and had to pay just over $8,000. He expects to get a reduction when he renews next month.

[rigidsporty]

After doing a little searching I found a company that posted their FSC. Its $0.30 CPM (it was in an April 2007 "Independant Contractor" magazine, I'm sure that number has changed since then but I'll just use that one for this calculation). Figuring that number in with the new insurance info (lets say $300/month), that brings the gross monthy total up to $5160. What else is coming out of that? I dont know how much the truck payment will be, but a lot of carriers require a later model truck so thats why I used the $1300 a month figure. I dont want a high payment but I also dont want a 2 million mile rattle trap either, and my financing options are limited.

Paying myself isnt really big concern starting out. I'm single and the house is paid for, so besides food my only bill is my pickup. How much would you set aside for repairs, depreciation, ect.?

[GMAN]

The fsc changes weekly. It is based upon the national fuel prices published by the feds, which comes out every Monday. OOIDA has a spreadsheet on their website which can help you to calculate the fsc. They also have another spreadsheet which will assist you in determining your operating costs. It isn't exact, but is a good start. Some owners allow from $0.08-0.15/mile for their maintenance account. The older the truck the more you should probably contribute to the account. Some continue to put money in the account as long as they run their truck. Others will stop once they get enough to rebuild their engine. I recall one guy who stopped once he got $25,000 in the account. Another continued to contribute to the account and eventually paid cash for his next truck since he didn't need everything he had in his account for maintenance. I would try to use the maintenance account only for major repairs, such as an engine, transmission or rears. I would not touch the account for anything that I could pay for at the time. Some owner operators will take money out of the account for any maintenance costs, such as tires, etc., I don't see a need to set aside money for depreciation. That is for your taxes and has little to do with your day to day operating expenses. I would also not want to start with a $1,300 truck payment. Starting out you need to keep your fixed operating costs as low as possible. During slow times, it can be difficult to make big truck payments. We have discussed this before, but you don't have to spend an arm and leg to get a good truck. I would concentrate on getting into a truck for less than $25,000. Less than $20,000 would be better. If you are going to buy a truck in the next few months, you should be able to get much more for your money than you could only a year or two ago. If you get a good deal in a truck there is no reason you should have a big truck payment. Too many new owner operators allow their ego to make their purchasing decisions when it comes to buying their first truck. They want to look "cool" rather than make money. One other thing to keep in mind is that the better carriers don't care how new or old your truck as long as it looks decent and will pass a DOT inspection. I have seen some older trucks that are in better shape than newer trucks.

[Orangetxguy]

Have you asked Jacobsen what all they pay?

Insurance will be one of those "paid" items..but you still need to carry your own...TO cover you...because the company you lease to...doesn't matter which one it is...covers themselves...not you.

My insurance is through 1st Guard. I pay $193.20 a month for Comprehensive on the truck, fire and theft, loss of revenue due to accident or major mechanical failure, plus my own "Bobtail". I also have "Tow" and environmental insurance. It all adds up.

[rigidsporty]

Gman, for the 3 years I have been on this site I have monitored your posts probably more than anyone elses (no offence to anyone else out there). You seem to have this amazing abilty to keep your cool and just lay the facts out no matter what the situation, and I have learned several things from you... one in particular is to buy with your brain and not your ego. If I buy a truck (and the doubts and the butterflies get thicker and thicker the closer I get to that, and I hate to sound like a 37 year old child, but I have to be honest... I'm scared), but if I buy a truck I dont care what the name on the side is. I dont care how long the hood is, I dont even care if its a cabover! The truck I want is one that starts and runs and goes down the road when I need it to, and gets decent fuel mileage.... period!

I called Jacobson today and they said when I get my truck bring it to Iowa (they'll pay up to $450 worth of fuel to get me there), they'll put the qualcomm in it, and I'll be rolling. They do not have a restriction on the age of the truck, all it has to do is pass the DOT inspection. If I buy a truck I've got the job. Actually here is the email he sent me after our phone conversation...

Tim

You would have no problem switching over to OO status. Just let me know when you get a truck.

Steve Orenic
Jacobson Companies
800-626-8786
866-287-5799 Fax

Orangetxguy, here is the attachment (it was in .pdf but I just copied it here) he sent with all the O/O info. I know it says "lease plan" but this isnt a lease, they dont offer that. I will be buying the truck from an outside source...



INTRODUCTION & GENERAL INFO


You have contacted us about our Owner Operator Program. We want to let you know the opportunity we have for Owner Operators. We operate 53’ dry van business with primary lanes originating in the Midwest with hauls to the Southeast and Southwest. Jacobson is negotiating new contracts and expanding existing relationships with major US shippers, and we have an immediate need for Independent Contractor Business Partners.

We are working hard to help our Owner Operator Business Partners with the escalating costs of operations, especially when it comes to “Black Gold” diesel fuel. We are negotiating higher charges with our shipper customers in our Fuel Surcharge program, and we pass this on to our Operators 100%. We also have initiated a very aggressive fuel discount program that will rebate up to $100 weekly to the Operator. This can equal $.03 cents/mile.

We also have provided just about everything for the Operator at no expense, including Plates, Permits, Drug Tests, Physical Exam, Direct Deposit, Qualcomm Usage & Installation, and tolls paid in certain areas.

Look this over and call me! We have the business and we can keep you rollin’ with good miles!


Steve
866-402-2887

OWNER OPERATOR LEASE PLAN


Summary of Program Offerings
$1,000 Sign On Bonus – paid in 3 installments
93 Cents Loaded
93 Cents Empty (paid after initial empty 35 miles)
LONGEVITY PAY – ½ ct/mile for first 3 years – One ct/mile after 5, 7 and 10 yrs
FSC PROGRAM –Average up to 62 cts/loaded mile August 2008
FREE BASE PLATES & PERMITS
SAFETY BONUS - $.01/mile paid out semi-annually
FUEL DISCOUNTS – Can add up to $100 week/$.03 per mile
FREE QUALCOMM usage & installation
FREE DIRECT DEPOSIT – actually in your bank on Friday
LOW FEE COMDATA CARD – good for all the fuel you can use and $200 weekly cash with fees generally as low as 35 cents
FREE PASSENGER PROGRAM - age 5+
$25 weekly deduct for fuel taxes – settled at end of quarter
$1000 escrow acct – deducted $50 weekly – Pays 6% Interest
Phys Damage Ins available at great rate, Bobtail is $8.00 deducted weekly
Loads are settled every Friday for paperwork scanned in by Wednesday 12N
Drug testing and Physical exam is free
Stop-off pay is $45 for 1st stop then each added stop pays $60, $85, $120
Handling is paid at $90 – Minimal occurence
Detention paid at $35/hr after 2nd hour – max of $225
Layover is paid at $75 per day after 24 hrs
Log-books are provided and daily logs must be turned in weekly – Logs must be maintained legally & in accordance with current DOT regulations


FREQUENTLY ASKED QUESTIONS



Who is Jacobson?
Jacobson (JTC) is a well respected carrier and a very successful part of the Jacobson Companies group, which includes Jacobson Warehouse and Jacobson Logistics. In business since 1967, JTC has a very established customer base primarily set up for drop & hook dry van freight movements. JTC also has a well-maintained late model fleet of 53’ dry van trailers. JTC offers a great settlement and support system for Owner Operators, and the partnership between JTC and it’s Owner Operators has been very successful. JTC is gradually transitioning company trucks into short-haul commitments, leaving the long haul open for the Contractors.

How many miles can I run?
We expect you to be able to haul 2700-3300 mile weekly as a solo. Our commitment to the long-haul market provides you with consistent mileage all year long. Based on being available 48 weeks of a calendar year, our solo owner operators can run 135,000 miles or better, depending on how they like to run and desired home time.

Does JTC have a forced dispatch?
No! We do not have a forced dispatch. Owner operators will never be forced to run to west coast or New York City.

How often will I get home?
Quality home time for every driver is a priority at JTC. Your fleet manager is responsible for getting you home on the day you request to be there. Most of our successful solo owner operators choose to remain available for two to three weeks at a time. Many like to be home every other weekend. Most of our successful team owner operators choose to remain available for three to four weeks at a time. A good rule of thumb to follow is being available 25 days of each month, but we do not dictate home time to you.

Does JTC have a policy on advances?
Yes, you will be able to use the Comdata fuel card for 300 gallons of fuel daily and $200 cash weekly. Teams will be able to get additional fuel and cash.
Does JTC offer Fuel Surcharge?
Yes. We have a FSC Schedule adjusted every Tuesday morning, and does vary depending on the Shipper. This amount is paid at the same time the load is settled with you.

How and when do I get paid?
Drivers are paid every Friday by direct deposit. Statements of earnings are prepared and sent to your home each week, via fax, email or regular mail. The load must be delivered and scanned in to JTC by Wednesday at 12 noon.

Does JTC have an escrow?
Yes. The bond totals $1000 and is payroll deducted at $50 per week until settled. This deduction is eliminated after 20 weeks. This amount earns 6% interest once established.

What types of insurance benefits does JTC offer?
Currently, independent contractors are provided with the option of Physical Damage and Bobtail insurance, to be deducted weekly through settlements. JTC can also provide the driver of the truck with health insurance and occupational accident insurance.

What type of operation does JTC have?
JTC owner operators transport 100% dry van freight for a wide variety of customers. There is no Hazmat and very little handling. JTC incurs all costs of liability insurance and the cargo insurance. JTC provides truckload service across the country hauling general commodities, but tends to “run up and down the middle” with most shipments, including hauls into the Southeast and Texas. West Coast freight is available at your choice.

What does JTC do for driver orientation?

JTC owner operators can attend an over-night orientation at corporate headquarters in Des Moines, IA. The lease is executed and all licensing and permits are provided after drug test results are returned. The driver will have everything needed to be dispatched the next day.

Who pays for fuel taxes?
JTC will file and compile all paperwork related to fuel taxes, but the charges will be the responsibility of the operator. JTC deducts $25 per week, and then settles up for the exact charge at the end of the quarterly period. FHUT 2290 taxes of $550.00/annual are the responsibility of the operator.

DRIVER APPLICATION
Fill out and FAX to
866/287-5799

You can also apply on our website today!

www.drivejtc.com

& click “Employment”

Call Steve 866/402-2887 and let him know you have applied on-line. He will get your application expedited!

[mike3fan]

I would look for a carrier that pays percentage,you make more and you will recieve a higher FSC,last week on one trip my FSC was $994.41 and the trip including 270 deadhead miles was 888 miles,and the second trip that week paid FSC of $748.88 on total miles of 1,051.

Total compensation for the week was $4,860.22 on 1,939 total miles.You would never have a chance to make those numbers in a mileage system.

No my company doesn't pay for my plates,but in the end $1,400 is only a little over .01 cpm on the 125,000 miles I drove last year.

[GMAN]

Gman, for the 3 years I have been on this site I have monitored your posts probably more than anyone elses (no offence to anyone else out there). You seem to have this amazing abilty to keep your cool and just lay the facts out no matter what the situation,
and I have learned several things from you... one in particular is to buy with your brain and not your ego. If I buy a truck (and the doubts and the butterflies get thicker and thicker the closer I get to that, and I hate to sound like a 37 year old child, but I have to be honest... I'm scared), but if I buy a truck I dont care what the name on the side is. I dont care how long the hood is, I dont even care if its a cabover! The truck I want is one that starts and runs and goes down the road when I need it to, and gets decent fuel mileage.... period!

I called Jacobson today and they said when I get my truck bring it to Iowa (they'll pay up to $450 worth of fuel to get me there), they'll put the qualcomm in it, and I'll be rolling. They do not have a restriction on the age of the truck, all it has to do is pass the DOT inspection. If I buy a truck I've got the job. Actually here is the email he sent me after our phone conversation...

Tim

I appreciate the kind words, Tim. I have had some moments lately. You have a good attitude. It is natural to be apprehensive when venturing into uncharted territory. It may sound like a simple transition from a company driver to an owner operator, but in reality you take on much more responsibility when you own the truck. If this is something that you really want to do, then you will find a way to make it work. I think it is good that you are sitting back and looking at the situation before spending your money. Too many drivers jump into ownership before they are ready. I prefer to be a bit more cautious, especially with today's economy. There is a lot of uncertainty. It is much better to wait than jump too soon. Even with an uncertain economic situation, people are still making money. Those with high overhead are the first to fall. Regardless of what happens with the economy freight must move. There may be less of it and rates may be down, but the freight will move at some price. I have been in business most of my life. I consider working for someone else to be more of a risk than running my own business. I can control my business. I cannot control someone else business. As an employee you are there only at the will of management. I think you gain a different perspective when you have been in business for some time. All businesses have ups and downs. I have certainly had my share. Obviously, I have had more ups than downs, otherwise I would not still be around.

It is good that you have all the numbers from Jacobson. I understand that it would be much easier to simply move from company driver to owner operator. Taking apart the numbers can be confusing. I see some good things they offer, such as base plates & permits, qualcomm, etc., It all mounts up. Some things they mention are usually the responsibility of the carrier, such as drug testing, liability & cargo insurance. I am a little troubled that they don't pay a fsc on deadhead miles since they pay a flat rate per mile.

If I were you, I would check with other carriers to see which would be best for you. I prefer percentage pay for drivers and owner operators. Most will do better than running for mileage. Percentage pay usually requires the owner or driver to be more proactive than mileage. You generally take on more responsibility for finding the better paying loads. Most percentage carriers will require you to pay for your own base plates and permits, although they may pay for them for you and deduct the funds from your weekly settlements. There are some differences between carriers. Some are better than others. I suggest you check with owner operators who are currently leased to any carrier to whom you are thinking about leasing.

While you are talking to owner operators and carriers look around for a good used truck. I usually spend a lot of time looking at trucks before I buy. I have some basic things that I want in a truck. I have other things that I would like, but are not a deal breaker. I usually wind up getting a good buy. If you have the cash or can get the money, this is a very good time to buy a truck. Prices are down at the auctions. There are record numbers of defaults and prices are down almost everywhere on class 8 equipment.

[Orangetxguy]

Speaking of trucks bought at auction...I've been wondering whatever became of that old California based antagonist....PEPE !