The definition of a lease according to the Merriam-Webster Dictionary is a “contract by which one conveys real estate, equipment, or facilities for a specified term and for a specified rent.” In the trucking industry we are going to focus on the equipment side of that and the different avenues an Owner Operator can take when leasing his equipment to a motor carrier (or from) and some of the advantages and disadvantages this opportunity can bring.
An Owner Operator Lease Agreement is a signed contract between the Owner Operator and an FMCSA registered motor carrier that allows the driver to run his equipment under the motor carrier’s authority. Since Owner Operators are not regular employees the contract serves as a written agreement between the driver (independent contractor) and the motor carrier to protect and inform both sides of all details in the contract. The goal is to eliminate any questions or confusion in case any issues are to arise.
Lease-Purchase Agreements are a bit different than a regular lease agreement by giving the Owner Operator a chance to buy the vehicle after the initial contract ends. These sometimes have higher monthly payments, but can also be an ideal match for someone who has some credit issues or is just getting started in the trucking business and is unable to purchase a truck from a traditional dealer. By making your lease-purchase payments on time you are not only building credit, but you are putting yourself in a good position at the end of the contract to purchase your vehicle by proving to the owners that you are reliable.
A Lease Program offered by a motor carrier is another option to help new truckers get started in the industry by allowing them to “lend” their vehicles to an independent driver to complete work for the motor carrier. This option does not allow the driver to purchase the vehicle at the end of the lease contract but does allow for them to renew it at the end of the stated period or they could have the opportunity to begin a lease on a different unit if one is available. This option may require a better credit score and the payments could also be higher than some of the lease options available.
Now that we have gone over some of the basics of what lease agreements you can enter into, let's see what all of them contain as far as basic keywords and terminology that they all have in common.
Lease Agreements are a vital part of the trucking industry. They provide truckers the opportunity to get started in the business and they allow motor carriers to invest in drivers that are more likely to take care of their equipment because they have a financial and personal interest in the contract. This is important as any violations or accidents that happen during this lease will go against the motor carrier’s CSA score which affects their insurance premiums for 3-5 years.
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