More About Hot Shot Trucking Start-Ups… Leasing

I still get tons of questions about starting a hot shot trucking business, so I thought I’d go over the subject again, this time focusing on what happens when you decide to lease to another company.

Obviously, I’m more inclined to advise people away from leasing, but from what I hear from others in the business, leasing seems to work for them.  Whether or not you lease successfully is completely dependent on two major points:  Your ability and willingness to follow rules and take care of small details, and the quality and honesty of the company you lease to.

In my case, leasing was a bad idea because the company owners were crooked as a split rail fence.  Even so, I took away a lot of knowledge from the experience and was jettisoned into learning the business at hyper-speed.

At any rate, some people prefer leasing, and if that’s the route you want to take, there are some things you need to think about, and some footwork you need to take care of ahead of time.

Aside from operational details, you need to be prepared for taxes as the leasing company will be sending you a 1099 tax form at the end of the year. This means that you will be responsible for any taxes owed come tax time, as they won’t be withholding anything from your checks during the year.

I strongly recommend you find a good CPA who is familiar with trucking leases.  It’s a great idea to find your CPA before you sign the lease, and have them look it over.  If there are glaring accounting problems caused by the way the lease is written, they should be able to advise you.

It’s also a great idea to have your attorney take a look at your lease before you commit yourself.  I know it’s a pain in the neck, but it probably won’t cost you more than $100 to have a lawyer go over it, and it might save you thousands down the road.

Leasing companies will require three years of driving history plus 10 years work history on whoever you plan to put behind the wheel of your truck, and they expect you to provide a copy of that info to them before they’ll agree to lease to you.

This isn’t because they’re hard-nosed, it’s because the DOT requires them to have this information on file.

In my state, I can get the driving history for about $25 from the local tag office.  In other places you may have to visit the County Clerk.

Just a note, make a copy of the driving history for the leasing company and keep your original so you don’t have to buy it again if things don’t work out a month down the road.

Leasing companies can and do dictate who can drive your equipment, so be sure that you, if you plan to drive, or the friend you plan to hire as your driver have the proper licensing, a squeaky clean driving history, and can pass mandatory random drug and alcohol testing every time your name gets pulled out of the hat.

When running under lease authority, you are required to also run under their insurance.  They’ll deduct this from your settlement checks and it should be detailed on your settlement sheet.

Note that their insurance will normally cover only the freight on your truck and commercial liability.  You still need bobtail insurance to cover your equipment.

Now, some companies will offer bobtail insurance through their insurer and deduct it from your settlement pay.  I’d avoid that for two reasons.  It’s going to cost you more than if you buy your own, and in the event that things go bad, you don’t want to be stranded somewhere with no insurance to get you home.

The same goes for truck and trailer tags.  I recommend buying your own.  Some companies will buy these for you, but if you decide to leave you have to turn them in, leaving you tag-less and stranded.  It’s a big chunk of change putting tags on a CMV, (somewhere around $1,500) but it’s well worth doing this out of pocket rather than risk being stranded.

When you go to get your tags in some states, you need to register with the Feds and obtain a DOT number.  Check your state regulations to see if this applies to you.  If so, you file with the DOT as a “Registrant Only” and they’ll send you paperwork to take to your state licensing agency.

Make sure you do a book for your truck.  Make copies of everything and stick the copies in a binder of some type so that you have them ready at hand in the event you get pulled in for an inspection.

This includes your DOT paperwork, your insurance, truck & trailer registrations and copies of titles, and when you do lease, you’ll need to copy the lease as well and add that to the book.  Copy any paperwork the leasing company gives you and put the originals away in a safe place, add the copies to the book.

You’ll also want to put copies of the IFTA cab card the leasing company gives you, any permits and other pertinent paperwork in the book.  I work on the theory that it’s better to have it and not need it.  Especially during an inspection!

Now, to operational details when leasing…

You’ll want to run a log book (most hotshot operations are required, check the regulations for specifics) and keep it up to date.  An accurate, up to date,  neatly kept log book can be your very best friend during an inspection or at the scales.

Not having one will cost you a small fortune in fines, and probably result in you being put out of service.  It will also potentially get you un-leased in a hurry, as the company can be subject to separate fines for their drivers failing to follow rules.

Your leasing company will most likely require logs anyway.  You’ll need to turn in log sheets along with any other paperwork (BOLs, proof of delivery, receipts, etc.,) on a regular basis.

Most companies will either hold back your settlement pay or punish you in some other fashion if you fail to turn in the proper paperwork, so get in the habit of keeping your papers together and organized.

You’ll also need to keep copies of every fuel purchase for the company IFTA reports.  Do not turn in your originals, but make copies and turn those in.  Keep your originals in a safe place and organized so you can find them again if you need them.  You may need to re-submit them if your paperwork is lost or misplaced by the leasing office personnel.  It happens…

I use envelopes to track my receipts and IFTA info, and most companies do.  You can stick all of the paperwork for a given load in the envelope and keep track of your mileage per state you travel through on the front.  You’ll be expected to list each highway you travel on while in any given state, and keep mileages upon entering and leaving states.

This may seem finicky, but it’s critical information that the company needs for those pesky IFTA quarterly reports.  If your paperwork isn’t up to snuff, they can and will withhold your pay until you get it caught up.  There’s a reason for this.  If IFTA reports are not filed on time, the company gets hit with penalties and fines.

Aside from the paperwork required, leasing is fairly straightforward as far as pickups and deliveries go.  Just make sure you are on time for everything!  Running late can get you in a lot of trouble and can cause you to lose a percentage of your expected pay on loads.

If you have any delays or problems, the first call you need to make is to your dispatcher, not your best buddy or your significant other.  It’s super important to keep the lines of communication open with your dispatcher. It’s also super important to be nice and professional with the dispatcher.

Never, never be a jerk or let any impatience or irritation show in your voice when dealing with dispatchers, even if they’re gigantic butt-heads to you.

If you don’t nurture this relationship you can bet you’ll get the worst loads, if you get loads at all.  A dispatcher is going to have their favorite drivers.  It’s just human.  If you go the extra mile to make the dispatcher happy, they’ll reward you.

If you complain, refuse loads, show up late, fail to call in, or misbehave in other ways they’ll label you a problem child, which means they’ll ignore you and starve you right out of business.

You will still need to outfit your own truck & trailer with the proper securement and safety equipment, and you definitely need to know how to use all of that equipment properly.

If you don’t know anything about securement, give yourself a crash course and study the materials available online.  If you have a friend working flatbed or hotshot, arrange to meet them when they pick up some loads and help them tie things down.

It’s a lot better to learn something about proper securement before you show up at your first load than it is to screw up and get either pulled over or, Heaven forbid, lose a piece of the load because you don’t know what you’re doing.

The same is true with your emergency equipment.  Take it out, look at it, play with it, and figure out how it works.  If you don’t know anything about first aid, learn.  You may be the first person on the scene of any number of emergency situations out on the road, and having some basic know-how might just save someone’s life.

Obviously, for some people the advantages of leasing outweigh the paperwork and other hassles of operating under their own authority.  Hopefully this will give those of you considering leasing a little better idea of what you can expect.






4 thoughts on “More About Hot Shot Trucking Start-Ups… Leasing

  1. I agree it is better to get your own authority instead of leasing on. We prefer our drivers do that because they are less liability as far as our safety rating is concerned. I have all but stopped taking drivers under our authority because a driver with 20 years of exp and a clean MVR is perfectly capable of racking up citations.
    Once again I am very impressed with your knowledge of the business as I stated on another article you posted.

  2. Thanks for your comments Afton. I can’t agree with you more. I have friends who have leased on owners and have watched their safety ratings suffer a lot of damage. From my perspective, the best way to operate is solo, particularly as far as ratings go. And I’m still learning, this is a complicated and sometimes convoluted business we’re in!

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