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Rookie
owner operator starting out
I have a somewhat simple question...How big of a nest-egg should a new owner operator have saved up before starting out?
Senior Board Member
It depends on a lot of factors:
- Availability and price of credit
- Age of equipment
- Reliability of equipment
- Frequency of getting home for repairs
- Mechanical knowledge of owner
- Stability of freight
- Profit margin of freight
- Structure of contract with carrier
- Amount of equipment o/o has bought (just a truck, or a truck and trailer, etc..)
- Frequency of payment
If all of these factors are in your favor you could get by with a very small float to start out with. However even just a few changes in these factors could push you way into the tens of thousands of dollars range.
Administrator
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Are you talking about leasing to a carrier or getting your authority?
Rookie
Leasing with a carrier.
Administrator
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Ideally, you should have enough set aside to do an over haul, which is $10-20,000. If you feel confident in the condition of your truck you could probably get along with less. When you lease to a carrier, most will turn your money within a few days to a week after you deliver a load. I would suggest that you build your savings or emergency fund as quickly as possible. You want to be able to replace a turbo or buy a couple of tires if needed.
Rookie
wow i had no clue how much $$$$ was involved in being a o/o. I had to ask because about 4 guys in class said that their getting a truck after we graduate. Smh! I think i will be an lease operator before going from otr to a full fledged o/o. How much can a lease operator make a year?
Member
According to most of the guys on here they might make it up to the triple digitsOriginally Posted by gula197
Administrator
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Most lease operators make less than a company driver. If you want to become an owner operator and do it right, then you need to save money starting with your first paycheck. You don't have to spend $50,000 to buy a good used truck. You should find a good truck for less than $20,000. If you can save $200/week you can save enough to buy a truck in a year or two. Whether you lease a truck or buy, you need to have money put back for the time when you break down. Make no mistake about it, you WILL break down. If you don't have money put back then you could be out of business. Leasing a truck is a way for many to lose their shirt. Most have NO idea of what it takes to operate a truck. Those who lease do pay out more than those of us who buy through conventional lending sources or pay cash. If you break down on the road, you can expect to spend a minimum of $200-300. If you need a tire you can add an additional $500-600. I keep a spare on my trucks so that I don't have to buy at truck stops or on the road. They will rob you at those places. When you break down, you could even need a wrecker. The last time I had a truck towed it cost me $954. The transmission went out on that truck and by the time I paid everything it cost me about $8,500 and a week of running. That included 5 days in a motel for my driver and paying him to sit for that time along with the repairs. Had I not had the funds to make those repairs, the truck could still be sitting. I had a rear end to go out on a truck in Nevada a few years ago. I spent over $4,500. I had a couple of other things done to the truck while it was down, but again, you either have the money to make the repairs or you are out of business. I put a front power divider in a truck at home and spent almost $1,000 just for parts.
A few years ago I blew 3 tires, had to replace a water hose and repair the radiator on a single trip. The radiator repair cost me about $1,000. I had a tire on the truck, but had to buy 2. I think that I had to pay over $200 for a worn out used tire. I think that I spent between $1,500-2,000 for repairs on that trip. I keep up the maintenance on my trucks, but things do happen. It is very unusual to blow 3 tires on one run, but it did happen.
Even if you have a warranty, there is no guarantee that the breakdown will be covered. Tires are rarely covered under warranty. Neither are radiators or hoses. If you have a warranty, they may only cover the engine.... maybe. Another time I had a turbo go out. I spent over $2,700 to replace it and have everything checked. The turbo alone cost over $1,500. The rest was labor and to change the oil. Most turbo's are only warrantied for 150,000 miles. Had this happened at a different place, I could have had a wrecker bill in addition to the repairs. Wrecker bills and road service are not usually covered under warranty. You don't want to drive a truck very far with a blown turbo.
The point I am trying to make to you is that there is a good reason why those of us who have owned trucks suggest that you have a good nest egg before starting out. Even new trucks can breakdown. You could drop an injector and have a very expensive repair on your hands. A bad injector is not cheap to repair. I believe the last time I had to replace an injector it cost $366 just for the part. I think the entire repair was over $800. It may have been more. I have no doubt that injectors are more today than then. I had a truck with a new engine that dropped a couple of valves. It has just gotten out of warranty with a little over 100,000 miles on the rebuild. I spent $6,700 to get it repaired. That was after an $18,000 over haul. The $6,700 came out of my pocket. No money, no truck. Fortunately, I had the means to pay my truck out of the shop.
You could get lucky and not have anything expensive happen for a while. I would not count on it. I am a firm believer in preparing for the worst. If you only plan for things to go right, then you are likely to have trouble.
Senior Board Member
Be smart with your insurance benefits. Some companies like Progressive gives you up to $175 a day when your truck is in an accident and being fixed or a rental. That's more than some guys make driving.
OOIDA had around $ 750 towing reimbursement and $ 1500 road service reimbursement. That's what it was when I got a quote.
This will help soften the blow.
Administrator
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It is good to weigh the benefits of paying a higher premium for add ons that you may never need. Sometimes it is better to save the money for a the time when you may need it rather than paying the premium.
Board Regular
I found out after I hit a deer that I had that coverage with Northland. I don't have it anymore lol
The daily payment doesn't start until you have been down for 5 days. I figured if I can afford to sit 5 days I can afford to sit a few more days without the extra cost on the premium. Mine also paid me 25% of my deductable back because I hadn't used the insurance. wooooohooooo $62 back for the added cost on the premium every month, I don't think so.
Board Regular
When I started out I bought my truck with 511K miles on it. Between 580K miles and 700K miles I spent $26K on it in repairs.
It now has 950k miles on it and I haven't had any repairs done since 700k miles except regular pm's.
If I wouldn't of had the money in the bank for repairs when I started I would have been done before I really even got started.
I think it all depends on where you are running too. When I started I was pulling heavy loads to the west coast over the mountains everyweek. The mountains and the heat put alot of stress on your truck. I now run a dedicated route, 360 miles a day on the flat and my truck basically just idles down the road.
Senior Board Member
Look at Tracer. He gets it done without any money saved.
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