I thought we were originally talking about someone starting out and buying a new truck vs. used. Unless a driver has been in this business for several years and previously owned trucks, he has no business buying a new truck. You should never buy something unless you know that you can afford to pay for it. When a driver starts out, he has no idea of what his operating expenses will run or how much money he will make. For those two reasons alone, he should not even consider buying a new truck unless he has a pot full of cash to make a big down payment. And when most drivers start out, they will more than likely start with a carrier who pays mileage. Most mileage carriers only pay around $0.90/mile or less. You don't know how hard you can run, how many miles you will run or how many runs the carrier will have for you. Things have been slow for several months. It isn't just one or two carriers, but most everyone has been slow for several months. If you commit to buying a truck expecting to run 3,000/week and now only get 2,000, you may or may not be able to survive. Your fixed expenses will be the same, whether your truck payment is $500 or $2,000. Your insurance will cost the same each month regardless of the miles you run. It will be much less on a truck that has a $500 payment than $2,000. If you become ill or have illness in the family, you may not be able to run as hard. You can survive much longer with a cheap payment than a big one.

Once an owner operator gets some experience and saves enough money, I see nothing wrong with him buying what he wants. After all, it is his money. But starting out, he should not even consider buying a new truck. That is where a lot of new owner operators get into trouble. They over extend. If you want a new truck, why not get the used truck and put the difference between the new payment and used? By the time the used truck is paid for, you may have enough to buy new. Just think, if you have a $500 payment and put $1,500/month in the bank you will save $18,000 per year. Assuming that you have a 3 year loan, you will have saved $54,000 over 3 years plus interest and any equity in your now paid off truck. Your used truck will likely still be worth around $15,000 giving you $69,000 to pay down on your new truck, if that is what you decide you want. If you go 4 years, you will have saved $72,000 plus the value of your paid off truck which may now only be worth $12,000. That gives you $84,000 to pay down on your new truck. Now if you can't afford to put the difference aside for the new truck, then you couldn't have afforded the new payment anyway. You still have the paid off truck and have preserved your credit. Doing it this way, you will not only earn money on what is saved, but save the interest expense on a new truck loan. This is a much less painless way to buy a new truck without killing yourself. By paying so much down, you should also be able to get a very good interest rate. Making payments on $50,000 will be much easier to do than on $135,000. Your payments may only run around $1,000/month. If you continue to put the difference aside on your new truck, you could pay it off in about 2 years. So, in a couple of years after you buy your new truck, it is paid off and you have equity. At that point, you could continue putting money aside and trade every 2-4 years and pay cash for another new truck at that time, providing that is what you want to do. Personally, I will spend the time to find a good used truck and bank the difference. 8)

 

Nope.

Couldn't disagree more. Read on.

GMAN, you are really overgeneralizing here. Some of us actually did our homework before purchasing our trucks (new or used), and knew what our operating expenses and cash flow would be before we had signed any paperwork. In fact, it is because I knew what my operating expenses would be, and what my cash flow would likely be, that I decided upon purchasing a new truck. I am sure I am not the only one who knew enough to do their homework before making such a large decision. But here you are, saying that we "have no idea" what it takes to operate a successful business. :roll:

I don't know where you get this sort of statistic from, GMAN, but I would love to see it.

Some of us have planned for this in our business plan.

If $1,500 a month is going to make or break you, then perhaps you have no business owning a truck in the first place.

Your little scenario leaves out one huge factor. REPAIRS.

I'll expect the standard "new trucks need repairs too" reply.

Right. Sure. Whatever you say.


Those of us in the REAL world know that a huge chunk of that money you "saved" by purchasing a used truck, especially such a cheap (and likely old) one, will go towards keeping it running. Not everyone gets those "gems" that you claim are so abundant.

Besides - there is a reason those used trucks you say we should buy were traded in. And, as the second (or possibly third) owner of the truck, the challenge falls in your hands to determine what it is.

 

I will add the following to the Rev's response...getting 3-4 years out of a truck that only cost $25,000 is going to take some serious knowledge about the equipment you're looking at. If a driver is not experienced enough to come up with a good approximation of his operating expenses and revenues, I doubt he will have the expertise to find that diamond in the rough in the used truck market.

 

My '95 W900L has been excellent to me. Paid $26k cash for it, put another $10k in off the bat...seats, fridge, had the rears gone through etc..anyways, it hasn't missed a lick on me yet. Pretty much put fuel in and change the oil...I'm very happy. Of course, I got a stack of work reciepts about 4" thick..the guy who had it prior to me kept it in tip top shape..my biggest "expense" so far was paint..

 

Rev, I still own a truck that I purchased about 5 years ago for $17,500, which was under wholesale. I have had to little to it since I purchased it. I have replaced the king pins ($1,600), fan clutch ($384), radiator ($500), both rears and oil pan ($5,600). In addition, I have replaced the brakes and several sets of tires. I don’t include those expenses since they would likely have needed to be replaced whether new or used during that time period. So I have spend just over $8,000 in repairs. That is less than $1,500 per year. According to a dealer to whom I spoke recently, the truck is still worth about $12,000-$15,000, perhaps more depending on how it is equipped. I would say that is not bad for a used truck .

I am glad you did your research before you bought your truck. While you may have done your research to find a good estimate as to what your revenue and expenses would run, you cannot know for sure until you run a truck for a couple of years. For the most part, drivers will base their expectations on what their carrier tells them about their average owner operator earnings. You may do more or less than the average, which will affect your numbers. All the carrier can really tell you is about your estimated revenue. They won’t know about your expenses. I have seen owner operators who lease to a carrier who didn’t have the money to buy a tire, much less cover an unexpected major repair. In addition, there could be unexpected economic factors which may affect your numbers. The last several months have been unseasonably slow for most segments of this business. I spoke with one major carrier and they said that this is the slowest they have seen it in 20 years. That is something most people will not expect or include in their plans. Most new owner operators with whom I have spoken don’t have a business plan. They have no idea of what it costs to operate their truck. From what I have seen, most new owner operators don’t have a clue as to what their expenses or revenue will run. Otherwise, these dealer lots would not be so full of trucks that have been lost by these owner operators. There is a big Freightliner dealer near me who has a lot full of used trucks. Many were purchased at auctions held by lenders who have taken back trucks that owner operators could not afford to keep. The problem is that too many new owner operators over extend themselves. The over estimate their revenue and under estimate their expenses. I dare say that some don’t even think about their expenses. All they know is that they want to buy a truck. Reality sets in later.

If you just look at the company listings on this website, most carriers pay mileage. In fact, the largest carriers seem to pay mileage. Schneider, J.B. Hunt, Swift and others pay mileage. Landstar, CRST Malone and Mercer are among those who pay percentage. Landstar is probably the largest of those who pay percentage. Inexperienced owner operators will go with the mileage carriers since they are not as rigid as to experience as the percentage carriers. Most of the percentage carriers require at least 1-2 years experience.

There are good buys out there. You simply have to spend the time to find them. You will likely look at a lot of junk before finding a really good truck. I saved at least $20,000 by taking my time. If I junked the truck tomorrow, I am still ahead of the game. If you take care of the truck, change the oil regularly and do regular maintenance, you should get several years of trouble free running. I have had other trucks I have owned that I haven’t had to spend a fortune on repairs. Out of all the trucks I have owned, I have only had one that needed major repairs. I blew the engine. At the time I could have rebuilt it for $8,500. I only paid $6,500 for the truck and trailer. In fairness, that was a few years ago when I purchased that truck and trailer.

 

You are the exception, and not the rule, and you know it.

Which is why I have always advocated against newer drivers becoming O/O's. But that is not what you stated at all.

Then those people deserve to go out of business, and the question of a new or used truck is moot.

They should.

Again - buying new or used is not the question for these people. They should be discouraged from buying altogether.

The company listings on this website do not reflect the majority of carriers in the transportation industry.

You honestly expect that the same guy who is too boneheaded to put together a business plan and calculate their projected expenses and revenue is going to take the time to find a quality used truck? :roll:

 

Unfortunately, most new owner operators don't have a plan and are unwilling to spend the time looking for a good buy. And I agree than a new driver should not go out and buy a truck. There are exceptions to any rule, but I think that the more experience a driver has prior to buying a truck the greater his chances for success.

 

I may disagree with you about new vs. used, but on the above comment, I agree 100%.

 

I keep laughing every time I read that.