Lease-Purchase Agreement
A lease-purchase agreement is a contract where a driver leases a truck from a carrier with the option to purchase it at the end of the lease term. Weekly payments are made from the driver's earnings, and the balance can be applied toward ownership.
In Depth
Lease-purchase programs are offered by many large carriers (Werner, Prime, Schneider, etc.) as a path for drivers to transition to owner-operator status without a large down payment. The carrier provides the truck, loads, and fuel discounts, and deducts weekly lease payments from settlements.
However, lease-purchase programs have a troubled reputation. Many drivers find that after deducting the lease payment, fuel, insurance, and carrier fees, there is little net income remaining. The truck is often returned at the end of the lease without enough equity to purchase it.
Before entering a lease-purchase, carefully model the weekly cash flow using actual load volumes and rates offered. Compare the effective cost-per-mile of the lease to purchasing a used truck outright with commercial financing.
Usage Example
Example: 'The lease-purchase offered $550/week payments on a new Peterbilt 579. After fuel and insurance deductions, I was netting $1,100/week.'
Related Calculators
Related Terms
Owner-Operator
An owner-operator is a truck driver who owns and operates their own commercial truck, running freight either independently (with their own authority) or leased onto a motor carrier.
Truck Payment
Truck payment refers to the monthly loan or lease payment on a commercial truck. For owner-operators, this is typically the second-largest fixed expense after fuel, ranging from $1,200–$4,000/month depending on truck value, down payment, and loan term.
Escrow Account
In trucking, an escrow account is a reserve fund held by a carrier on behalf of a leased owner-operator. It is funded by deductions from the driver's weekly settlements and is used to cover expenses like repairs, permits, or end-of-lease obligations.
Operating Ratio
Operating ratio is total operating expenses divided by gross revenue, expressed as a percentage. A ratio of 85% means $0.85 of every dollar earned goes to expenses, leaving a 15% profit margin.
Frequently Asked Questions
Is a lease-purchase a good deal?
Often not. After deducting all carrier fees, fuel, and the lease payment, many drivers earn less than company driver wages. Model the numbers carefully first.
What happens at the end of a lease-purchase?
You can purchase the truck for the residual value, extend the lease, or return it. Read the contract carefully — buyout terms vary widely.