5) What the Owner Operator Needs to Know About Equipment

2001 Kenworth T600

Information About How to Become an Owner Operator

5) Equipment

See my other posts:

Blogs, Forums and Other Resources
Texting Ban
The Way it Was - A Short History of Trucking
Pro and Cons of Being an Owner Operator
FAQ for the Owner Operator
Pictures
Anti-Idling Regulations
Definitions and Industry Terms
Interactive Cost per Mile (CPM) Calculator Spreadsheet
Privacy PolicyOwner 
 
1) Owner Operator 411 – Welcome
2) Income and Expenses
3) Financing and Credit
4) Operating Authority or Leasing?
6) How To Do Bookkeeping and Other Necessary Paperwork
7) What You Need to Know About Loadboards
8) Companies That Lease Beginning Owner Operators
9) What You Actually Need to Get Started - Licenses, Permits, Insurance, and Taxes
10) Truck Driving Schools

There is one more thing you need to decide before you apply for a loan (assuming you have read my previous posts): what kind of freight do you want to haul?

This will determine what company you can lease to (all companies don't haul all types of freight) and what kind of equipment you will need. If you are buying your own trailer, then you need to know what kind to buy based on what you will be hauling. For example, do you need a refrigerated trailer (reefer) to haul food, a dry van for general freight, a flatbed to haul steel, or a drop deck or goose neck to haul equipment?

Even if you don't buy your own trailer, knowing what you will be hauling will determine how to spec your tractor. If you are going to be hauling heavy loads, you need to spec a tractor with heavy duty suspension and a big motor. If you are going to be hauling mostly light loads, you might be able to get by with a tractor with a smaller engine or lighter suspension. Also, the type and length of trailer might determine the length of the wheelbase of your tractor. What you are planning to haul will definitely decide how much your tractor can weigh.

Deciding what you will be hauling will also tell you what other equipment you need to buy. If you are going to pull a drop deck or goose neck, you will need chains, tarps and binders. If you are planning on pulling a flat bed, you will need all of those things plus a side kit. If you pull a dry van, you most likely will need load jacks.

When you are deciding what you are going to haul, don't forget to think about the physical side of what you choose. If you are going to be pulling a flatbed, you will have to be outside in all types of weather chaining and tarping your load. If you want to pull a reefer, you may be required to unload it, which means you will be working in very low temperatures, regardless of what the outside temperature is.

When you spec your tractor, there are several factors you need to need to consider. Will you be making long or short hauls? If you make long hauls, you will probably want to spec a sleeper. You don't want to spend all of your money on motels, and besides, there are a lot of times when you have to spend a night on the road and can't get to a motel.

What kind of engine do you want and how much horsepower do you want? The three major engines are Cummins, Paccar, and Detroit. Caterpillar no longer makes engines for semis, but can still be found in older tractors.

You need to decide what size tires you want, and what kind of a transmission and how many gears. Today, you can get a semi with an automatic transmission! Definitely a far cry from the old days when many trucks had two sticks (two gearshifts).

Modern trucks have power steering, ABS brakes, heat and air conditioning. They have big comfortable seats and privacy curtains. The beds are large and comfortable and some have a couch, and some have two beds. Most have closets and storage space. You have to decide what you need, then decide how much of what you want you can afford.

Other equipment you will need is gloves, coveralls, fuses, flares, a fire extinguisher (mandatory), tools, oil, fuel, and water filters, and maybe a CB. You should also carry oil, grease, and anti-freeze.  A smart phone is practically a must-have.

Optional equipment you may want, a satellite radio, and a TV. If you are planning on being gone from home a lot, you might want to consider buying an inverter. Then you can buy a coffee pot, a toaster and a microwave, and save yourself a lot of money on meals. 

A note about meals: When you file your taxes, the IRS lets people who are in the transportation industry and those who are regulated by hours-of-service rules (see "Income and Expenses") deduct meals differently and at different rates than everyone else. See an accountant or tax preparer for details. To simplify a very complicated rule, basically you can flat-rate your meals for every day you are on the road long enough that you are required to take a sleep break, even if you don't eat a thing, or spend a dime. Of course with the IRS, there are 40,000 ifs, ands, ors, and buts, so be sure to check it out with a tax professional or preparer.

An auxiliary power unit (APU) is becoming a must have. These range from about $6,000.00 to $10,000.00. What is an APU and what does it do? Basically, it is a generator. It is used when you are not driving to eliminate idling. Why is idling necessary? If you have to sleep in the truck in the winter or summer, you will probably run your truck so you can have heat or air conditioning. It is hard to sleep when it 25 degrees or 118 degrees in the sleeper.

With an APU, you can heat or cool your cab without running you truck. This is very important, as an APU can reduce your fuel consumption by about 75 %. Yes, I said 75%. Instead of using a gallon of diesel an hour idling, you use a quart with an APU. Not only is this important for your bottom line, but more and more cities and states are making anti-idling laws with fines ranging from $50.00 to $25,000.00 and/or up to 1 year in prison, for idling your truck.

Sometimes the idle time allowed is as few as three minutes. These anti-idling laws were written to reduce noise and air pollution. 

Click here to go to an: Anti-idling Regulations Chart

To view this chart you need Adobe Acrobat Reader

The cost and age of your equipment can affect the costs of your license plates and insurance.

As you can see, it is very important to decide on your equipment before you make a commitment. Once you have bought that $40,000.00 used truck, it is very hard to change to another truck if you find you don't like what you bought.

Although you will never know exactly what it is like until you actually do it, you need to ask questions of other drivers about their equipment, and what they like and don't like about it. If at all possible, go out on a load with someone. Volunteer to help them load/unload to get a feel of what it is like. The more you know before you buy, the better off you will be.

What make of a truck should you buy? That is up to you. Just a some people wouldn't own anything but a Chevy, some people won't own anything but a Volvo.

Any make of truck, if spec'd correctly, will do the job, it is a matter of personal preference and how much you can afford to pay.

The most popular trucks are Peterbilt, Kenworth, and Volvo. Other popular truck makes are: Freightliner, International, Ford, Mack, Sterling, and Western Star.

Anything with a Gross Vehicle Weight Rating above 33,000 lbs. is a "Class 8" truck.

Good places to look for a truck (new or used) are "The Truck Paper" and "Truck Trader". If you have cash and are very familiar with trucks, good deals can sometimes be found on eBay.

Next post: How To Do Bookkeeping and Other Necessary Paperwor

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2) Owner Operator Income and Expenses

96 Kenworth

Becoming An Owner Operator

2) Income and Expenses

See my other posts:

Blogs, Forums and Other Resources
Texting Ban
The Way it Was - A Short History of Trucking
Pro and Cons of Being an Owner Operator
FAQ for the Owner Operator
Pictures
Anti-Idling Regulations
Definitions and Industry Terms
Interactive Cost per Mile (CPM) Calculator Spreadsheet
Privacy Policy
 
1) Owner Operator 411 – Welcome
3) Financing and Credit
4) Operating Authority or Leasing?
5) Equipment
6) How To Do Bookkeeping and Other Necessary Paperwork
7) What You Need to Know About Loadboards
8) Companies That Lease Beginning Owner Operators
9) What You Actually Need to Get Started - Licenses, Permits, Insurance, and Taxes
10) Truck Driving Schools

We have been in the trucking business since 1967, and since 1972 as an owner-operator. Having been around so long, I can guarantee you, you will not get rich quick driving a big rig. You probably won't even make a lot of money.

Well, let me clarify that. You can gross some big bucks, and a lot of owner operators will throw out those numbers when they are talking to you, such as “I made $150,000 last year.” They aren't lying, they did GROSS $150,000 last year, but what did they net?

After expenses, the average owner operator will not make a lot of money, but will only make about ¼ of what they gross – and most don't gross $150,000.

Why does one make so little money if ones grosses so much? Simple: Expenses. The owner-operator has to pay ALL of their own expenses. I mean everything. Want to carry a roll of toilet paper in the truck? YOU buy it. Need a $20,000.00 engine overhaul? YOU pay for it.

We are not netting any more today than we did when we bought our first truck in 1972.  Why?  Deregulation!  Before deregulation, rates were set by the government, and there were few carriers.  After deregulation, every Tom, Dick and Harry could apply for and become a carrier.  Rates started going down.

Let me give you an example.  I used to pull a flatbed, and I routinely hauled steel coils from Washington, PA to Houston, TX for $2,800.00.  Pretty good money for 1975.  Then one day, I was offered the same load for $2,500.  I refused it.  Within a year, the rate was down to $1,800.  The rates have never really recovered.

First, for those just starting out, let me explain some terms.

GROSS: This can have two meaning for some owner-operators, depending you whether you have your own authority or are leased to a company.

Example:
ABC Company will pay $500.00 to have their load hauled. If you have your own authority, they will pay you the $500.00. This is your gross. If you are leased to XYZ Company, ABC will pay XYZ $500.00. This is the gross revenue for the load or "truck gross". XYZ will take a cut of that money and pass on to (pay) you what is left. Let's say they keep 25% (for their services). Then out of that $500.00, you will gross 75% of $500.00 or $375.00.

EXPENSES: What it costs to operate your truck. This is pretty much anything and everything. The IRS tells you what is allowable and what is not, but for the most part, just use your common sense.

Need tires? Allowed.

Got a ticket speeding (breaking the law)? Not allowed.

Need to eat? Allowed. Unless you live in your truck. There is an IRS rule about being away from home before you can take the cost of food. If you live in your truck (don't have a permanent residence), then you are not away from home.

Your dog that you take with you needs to eat? Not allowed.

Your daughter that you take with needs to eat? Maybe. Does she just go along for the scenery? Not allowed. Does she drive and/or help in other ways? Allowed.

Your truck needs to eat (fuel). Allowed.

As you can see, the expense has to be directly tied to the operation of the truck before you can claim it. Whoa! Wait up. Some of these expenses can be deducted, and some have to be depreciated, and some you may have a choice of which you want to do. More later.

NET: What is left over after all expenses are paid.

O.K. What do we have now? You worked your butt off last year and grossed that $150,000.00 that someone told you about. You bought fuel (the #1 expense), tires, oil, and grease. You paid for insurance, minor breakdowns and routine repairs, and upkeep. You paid for a cell phone, and meals on the road.

What else? Oh, yeah, you paid taxes. You probably paid taxes when you bought your truck. You paid taxes when you bought your license, you paid taxes for making money, and you paid taxes to use the roads so you could do your job - in addition to the tolls you paid to drive on the roads. Whew! That's a lot of taxes. Lucky for us, these taxes are deductible on your income tax return. You bought tools, and had your truck washed. After you paid for all of these things (and more), you have about $30,000.00 left. That is your net.

Please note: this is only an example of how you arrive at a net figure - not actual figures.

"Wow! I netted (cleared) $30,000.00 last year", you may think to yourself. That is more than I would make working a 9-5 job. That is true, but you weren't working 9-5 to make that money, either. Chances are you were gone from home, at the very minimum, Monday morning to Friday night. In reality, you were probably gone longer than that to make that kind of money. Many truck drivers, especially those who make the big bucks, are gone from home for weeks at a time. While they were gone, they were working 14 hour days. They may be making a lot of money, but they never get to see their family. They miss out on all the things their kids are doing in school. They miss out on their kids growing up. They miss out being with their spouse. They miss out on living.

When you do get home, you will make it up to your family, right? Well... the truck probably needs some routine maintenance done. Aren't going to do it yourself? Fine, you still have to take the truck to a shop, and probably wait while they do the work. If your kids don't have ball practice, or your spouse doesn't have a PTA meeting, take them with you. They will love sitting around a shop while you get the oil changed, but, hey! you are all together. After that, you can go home and sleep until time to go out again. If the kids really want to see Daddy, they can sit around the bed and watch you sleep. When you get up, if they aren't in bed, you can have a family get-together while they tell you how funny you were snoring.

I know I sound kind of pessimistic, but so many people think it is easy to drive a truck and make a lot of money and maybe even get rich, but it just ain't gonna happen.

If you think my figures are unrealistic, see The Real Cost of Trucking at Truckers report.

There are some good things about being an owner-operator and I will get into that in a later post.

***NOTICE - CAUTION***: I am an owner-operator, not a tax professional. I drive a truck for a living, so don't take me at my word about taxes. Have a tax professional check it out, and give you their advice. Not all accountants are created equal.

Try to find someone who knows about trucks. Some truck expenses have their own rules, like how much you can take for meals. There are special IRS rules regarding meals that only apply to someone in transportation, and rules applying to people regulated by hours-of-service. If your accountant doesn't know anything about trucks, they might miss that and not allow you to deduct enough for your meals on the road.

More on my next post. Later I will also try to get into what it was like when I first started driving way "back in the day" and will try to put some old pictures on here, too. So keep checking back.