Status Transportation: Purchasing vs Leasing a Trailer

How it Started

When Status Transportation started its business (back in 2009), we started offering owner operator jobs to independent truck drivers with one truck and one trailer. Status owned a 12-year-old trailer with a translucent roof obtained in barely working condition. When Status Transportation sent its truck to pick up a load, many shippers rejected the trailer as soon as it arrived at the shipper's facility due to its age, interior condition, unacceptable roof type and a dozen other reasons. Some of these reasons were legitimate and some were prompted due to the overall condition of the trailer. However, the owner operator trucking business was picking up and we needed to find a solution to upgrade our trailer. We had to find a solution to the trailer issue because when we first opened our doors we had also acquired a second trailer in similar conditions.

Status Transportation applied to lease trailers from major semi trailer leasing companies, but the application was immediately rejected because of the company’s short business and credit history. Status had been in business for only 3 months and that did not help. Thanks to a very lucky turn of events, an Illinois-based trailer lease company was about to start operations in Lakeland, FL and they were looking for clientele. Status Transportation, located in Winter Garden, FL came in knocking on their door since the trailer rental place was just 30 miles away.

Just in the first year, Status expanded to 9 owner operators, therefore it leased 8 additional dry vans to keep up with growth. During the second year, 9 additional trucks were added to the company and the need for trailers increased even more. The very first trailer ended its days, nobody remembers exactly where, so as far as trailers there was a total of 18 rented trailers.

Purchased or Leased Trailers?

Leasing trailers was very convenient but after careful calculations, Status discovered there were other factors to consider. First of all, Status Transportation was responsible for the maintenance of leased equipment. When a trailer was turned in, the trailer leasing company inspected it and measured tires and brakes for wear. They would also measure tire tread by 1/32 and compare it to the inspection report made on the day when the trailer left their yard.

Afterward, the receiving person would walk around the trailer to inspect if there were any other deficiencies such as scratches on the sides, missing or broken mud flaps, missing of burned bulbs, broken air lines, and miscellaneous deficiencies. After returning the trailer, Status Transportation would receive a bill outlining all the charges that needed to be paid and pay the invoice at a later time.

Status Trucks realized that trailer rental money would never be paid back and the investment to upkeep trailers would never pay off. For that very obvious reason, we made the decision to buy our own trailers. It is important to notice that at the very beginning of the business operation buying a trailer was not even an option. The company was too young and no bank or financial institution would lend Status the money. Two years later, though, the situation had changed. Status was about to celebrate its 2nd anniversary and around that time applied for financing at two different financial institutions for a loan to purchase 6 new trailers. Each institution approved the loan for enough money to buy 3 trailers.

It was necessary to mark trailer with our logo, website, phone number, etc. Status found a local vinyl sticker vendor located in Orlando, FL. Everything seemed to be very clear and easy, although there was a major problem, we had to pick up the trailers at a plant located in Stoughton, WI. We decided to fly and bring the vinyl stickers in person to the manufacturing plant. Thankfully, a security guard on site allowed the Status personnel to access the storage yard and place the stickers on the newly purchased trailers. Trailer branding was taken care of and now we needed to focus on paying them off and continue growing as a company.

As far as our expectations for these new trailers, we wanted these trailers to become an investment. There are multiple benefits from buying vs leasing, but one of the main advantages was that we would not see our money disappear into thin air since payments toward paying off the trailers were actually turning into company property. As company property, we could also gradually expense these trailers over time as they depreciated. It is important for new businesses to find ways to leverage its assets for maximum efficiency and increase profits.

Owning the trailers also gave Status Trucks the ability to decide how to upkeep the new equipment. Now that the trailers were company property we were in charge of maintaining them but most importantly we could also decide how much and when to invest in maintenance. This was an option we did not have before.

New Trailers vs Older Leased Trailer

Status Transportation observed an important fact when completing the initial trailer purchase. At the beginning of business operations, all leased trailers were around 5 years old. Leased trailers exchanged the hands of independent truck drivers or other owner operator companies many times in their life. The constant exchange created a wide range of problems, which could be determined as a lack of ownership problem. Trailer renters do not want to invest a significant amount of money into equipment that does not belong to them. Therefore, many of those rented trailers would barely be repaired, or repaired only to a point where they pass the return inspection, but then break down again very soon.

Having rental equipment was becoming a big headache for some of the owner operators Status was running. On the other side, the new equipment was a huge relief. The recently acquired equipment was brand new and also had virgin tires and brakes. Practice showed that trailers did not require any serious maintenance for nearly two years, other than tire and brake wear of course. This was a significant saving.

Another benefit of having our own trailers was that it was up to Status to determine to what level, standard and how the equipment was to be maintained. Status was now the owner of the equipment and it was very clear that it was worth investing the money into high standard maintenance. Preventive maintenance extended equipment life, helped to avoid unexpected breakdowns on the side of the road, and also helped in retaining trailer's market value in case we needed to sell any of the units at some point.

It is important to mention that having new trailers reduced previous trailer rejection rate to nearly zero percent for our owner operators. Nobody in their right mind would think about rejecting brand new, food grade dry van.

It was very clear for the Status Trucks team that buying its own trailers to support the owner operator trucking business was a very reasonable decision on so many levels. This understanding led to the future purchase of our own vans, flatbeds and minimized the need for leased equipment that tends to cause a lot of unnecessary expenses.

For more articles and information on owner operator trucking jobs please visit our website at www.statustransportation.com