Admin
April 19th, 2005, 10:08
This is the final of five articles written to assist you in considering expediting as a career.
Setting goals, budgeting, truck buying and summation
Each person entering this industry has certain goals that they wish to achieve. Prior to starting your driving career, it would be a good idea to write those goals down. Whether your goal is to keep a roof over your family’s heads and food on the table or if you dream of one day owning a trucking company, your goal remains a reality as long as you understand the steps that you will face in order to make it to the finish line.
If your goal is to own your own truck one day, then allow yourself to dream about what kind of truck you would like. Get a photo from a brochure and place it within your vision near your bunk. Use the photo to remind you of this goal, and set financial requirements and time schedules you will need to meet in order to make that dream come true. Be realistic about the time needed and do your best to put a specific amount away each week. If you fall short one week and have a very good week the next, then set aside the difference from the better week to make up for the week you fell short. Be understanding of yourself, and allow some small reward to celebrate pre selected amounts saved.
The point is no matter your goal, you will find any career more satisfying if you feel you are making progress toward its achievement. Remember that you will more than likely be an independent contractor whether driving for someone else or as an owner operator and therefore responsible for your own income taxes. Speak with your tax advisor about your projected income and expected expenses, and plan to make quarterly payments to your state and the Federal income tax officials. If you do not have an accountant or feel yours may not understand the field you are about to enter, then do a little homework and find tax advisors that specialize in this industry. The money you spend with them can be saved many times over by their knowledge of deductions, and expenses that can reduce your taxable income.
Whether you are in your twenties or your fifties you need to be thinking about retirement. Hopefully for those of us who have more than a wrinkle or two, we have planned for the day when we will either choose or be forced to retire. I assure those who are reading this in their twenties and thirties, that failure to plan now will leave you in a total panic if you fail to prepare for your own future. There are many different sites on the internet that can teach you how as little as $20 a week saved and invested properly can provide a comfortable retirement for those who begin at an early stage. Those of us beyond help at the $20 to $100 a week savings plans, can only try to maximize our investments, and should be thinking about selling anything of value today that may be less valuable tomorrow; of course unless the investment is producing income that cannot be matched or closely approximated without it.
Each day in this industry is a challenge and can be viewed negatively or positively. Each day is a learning experience and when you pay attention you can learn ways to repeat the positives and eliminate the negatives. By making the most of each day, you can learn to conserve fuel, save on meals and put more cash into your pockets. Regardless of your goals you should attempt to save every possible penny without making your life on the road miserable. There are many ways to have a few little treats without spending the many times exorbitant prices charged in most truck stops. Savvy drivers shop at discount stores like Wal-Mart for many of their needs. Soft drinks and bottled water can be bought by the case and taken aboard your truck at affordable prices. Snacks and meals can be prepared in your microwave and many drivers carry small grills for outdoor cooking. Aside from fuel, food is the most the most expensive item for all drivers.
The amount of money that can be saved each week by preparing your own meals can have a tremendous impact on your bottom line. If you enjoy snacks, buy them in bulk and carry them with you. Most expedited trucks have refrigerators that can keep milk and other liquids cold, and coffee can be made in your sleeper. Having snacks, soft drinks and coffee readily available will save you some serious change each week. By establishing a savings goal and having devices like IRA’s and other tax deferred investment programs, an individual or couple in this or any career can prepare for their retirements and take pleasure in knowing they will be comfortable in their later years.
Drivers in general probably rank in the top ten professions of those who have little if anything to show for their work. The temptations to spend a dollar here and a dollar there are encountered many times each day. Gaming machines, overpriced food and snacks, fast food, fuel from overpriced pumps, improper use of Comdata cards, cell phones, WiFi*, unnecessary toys, sparkling chrome items, fancy mud flaps, fuzzy dice, expensive CB equipment, electronic do-das, and lot lizards are only a few of the spoils available designed to part the foolish driver and his money. Some drivers succumb to many of these temptations, and find themselves living from paycheck to paycheck. Don’t become one of them. The money wasting decisions you make today will leave you financially challenged for years to come.
If you have decided against the advice given to enter this industry as a driver and have made the decision to buy a truck, then I do have additional advice for you.
First of all, do not be in a hurry. The only person that benefits from your over anxiousness is the truck salesman. Buying a truck is a completely different challenge from buying a car. Cars have MSRP’s that are normally within a certain reasonable percentage of the price for which the car can actually be purchased. Truck MSRP’s are totally obnoxious. Many will show you the MSRP and give you a great deal by discounting that price by 10% or even 20 %. Sound like a good deal? NOT!
Where truck pricing is concerned, there is little if anything that is out in the open. There are dealers specializing in “Expediter Trucks” that have them advertised for massive profits and some will not budge from those prices. There are dealers with repossessed trucks on the lot with low mileage, priced above what the truck should have sold for new. Try going to a truck dealer that does not sell expedited trucks and get a price for a straight truck without a sleeper or a box. Shop the same truck by using the internet and price in an apples to apples comparison with several dealers, and don’t be bashful about telling one dealer what another quoted you. Play each dealer until you finally hear...”I can equal that price, but I cannot beat it.” Now do the same with the sleeper companies. Each sleeper manufacturer will have their own specifics that make their sleeper far superior to the next. Do you best to find the size you need, then look at the finished product assessing which best suits your needs at the lowest price. Repeat the entire process for the box and when you have all three priced, compare the figure to the pre-assembled “Expediter Trucks”.
Will you find a major difference? You can bank on it. In fact, you should bank on it, with the difference placed into the cost of the truck or into the bank. But there are other alternatives. Some “Expediter Trucks” can be had or ordered for reasonable prices when the dealers know that you have done your homework, and will not stand still for a fleecing. Selling you a truck at a reasonable profit is to them a viable alternative to missing a sale altogether. I know of one dealership that will come down 2 or 3 thousand on a truck that should cost 15 thousand less than their price, and will not budge from there. There are many trucks on the road from this dealer and those who bought them will find out at a later time that while thinking they got a good deal, they actually overpaid by a minimum of $10,000. Good deal... I think not.
You will also find that there are dealers who claim to have great deals on expediter vans. These base units vans with small conversions that add thousands of dollars. Normally these vans include all the smaller items needed on the road, but buyer beware. These dealers are charging the full listed price for both the van and the conversion. One dealer in particular adds six thousand for a fold down bunk with a fan in the roof. A different dealer claims great deals on Sprinters and offered me a 2004 at three hundred above invoice. I purchased an identical 2005 Sprinter one week later from a dealer some distance away from this centrally located dealer, for three hundred below invoice, realized a six hundred dollar savings and have a current model. We will perform a complete conversion on this van including m/w, tv and refrigerator for about the same cost as the dealer selling his basic fold down bunk with a fan.
Used trucks are very similar to used cars. Those with low mileage and a few months old will bring the highest prices, but should reflect significant reductions for age and mileage accordingly. Some do...some don’t. There are dealers who have connections to specific carriers that can and will gladly arrange financing, regardless of your credit. That arrangement in itself should fire a very loud warning shot directly over your head. All you need is a few thousand down and a valid CDL. What you will be encountering with this, is an arrangement that will tie you to the carrier that you sign on with and may at first glance look to be a good deal. If you decide that you no longer wish to drive for that carrier you will have to terminate the arrangement and the full amount will become due on demand. So what’s the big deal? More than likely you will be buying a used truck as the second, third, or fourth owner. You will agree to pay in some cases tens of thousands of dollars more than the truck is worth. If you find your income does not allow you to make the payments (very likely), the truck will be repossessed and the cycle will be repeated. Until the truck is resold you will be contacted on a regular basis asking for you to make good on the loan. Failure to do so will require some drastic measures on your part...like bankruptcy. As I stated before, do not get in a hurry. If you don’t take the time to learn about what you are buying, you will be badly burned.
The following formula is my personal method to value a used truck. If you check the values of the used trucks on lots across the country you will find the sales prices much higher, however if you are in a position to sell a used truck to these same lots, the price you will be offered will be even less than the figures you see below. Beware, the price you pay for a used truck will determine your ability to turn a reasonable profit for your efforts.
In my opinion a used class 7 truck could be valued fairly in the following manner. Determine the original purchase price and remember not to take a dealers word. Research the going rate at the time of the original sale and if from one specific dealer you can deduct at least $10,000 from that starting price. If well maintained, a truck should be worth about 25% of the original purchase price when it reaches 500,000 miles or 5 years of age. I use an accelerated depreciation schedule based on my own personal experiences with routine repairs I have had over the lifetime of many trucks. This system is directly related to the vehicle warranty and expected part replacements.
$85,000 truck on original purchase
residual value at 5 years or 500,000 miles is 25% of $85K or $21,250.00
add this figure to the present depreciated value...
1 year or 100,000 miles deduct one 40% of the (original price – the residual value) whichever comes first
or 85k-21,500 = $60,500 x 60% = $36,300.00 + residual = $57,550.00
2 years or 200,000 miles
$60,500 x 40% = $30,250.00 + residual = $45,450.00
3 years or 300,000
$60,500 x 20% = $12,100.00 + residual = $33,250.00
4 years or 400,000
$60,500 x 10% = $ 6,050.00 + residual = $27,300.00
5 years of 500,00 $21,250.00
It has always been my advice to live as free from debt as possible. Any used vehicle purchased after the first two years of service or after the 200,000 is a gamble as most will have no warranty and the repairs and replacement of parts that will wear out on these trucks can be very costly. It is my belief that present used truck prices are artificially high, because of the demand created by the increase in expedited freight of the last two years, and that you will soon see these prices dropping. I predict that many expediters will soon be tossing in the towel, unable to make high payments on overpriced trucks while faced with the ever increasing fuel prices and a repressed demand for our services. So if you cannot buy a new truck, or wish to get a late model truck which is fairly priced, just hang in there until about July or August. Even when these opportunities are presented, it is still advised to avoid buying a truck until you have at least two years in the industry.
These articles were written for those considering entering our industry. Individuals who have related experience in driving should pay close attention to the advice given and understand that these articles are not meant to discourage you in any way from entry into the career that supports all of us on this site and thousands of others. The articles are written to show the reader that this business requires thought, discipline and business savvy to succeed. It is not as simple as buying a truck and collecting checks. We invite anyone to use our site to inquire about any issues that you may have, or questions regarding the lifestyle you can expect. The site is filled with active and concerned individuals with your best interest in mind.
Thumbnail recap for wannabes...
1. Do not buy a truck
2. Do not buy a truck
3. Carefully consider the lifestyle adjustments you will have to make and decide if you will begin as a solo or team. Be certain to discuss these adjustments with your family.
4. Determine if you want to drive as a solo or a team knowing again the adjustments necessary.
5. Choose the carrier first based on your driving desires as stated in part 2.
6. Choose your owner carefully using the guidelines given in part 3.
7. Do not buy a truck.
8. If you choose to ignore the advice given enter as an owner operator use the information in part 4 to determine a fair price and be very careful regarding financing options.
9. Do not buy a truck, until you have at least 2 years experience in the expedited industry.
10. If you follow the advice given here you will be making informed decisions about your new career. We wish you luck in the world of expediters and invite you to the forums of Expediter
by: Tom Robertson, Editor
April 19, 2005
This article is property of Expediter World™ ©2005-2006
Setting goals, budgeting, truck buying and summation
Each person entering this industry has certain goals that they wish to achieve. Prior to starting your driving career, it would be a good idea to write those goals down. Whether your goal is to keep a roof over your family’s heads and food on the table or if you dream of one day owning a trucking company, your goal remains a reality as long as you understand the steps that you will face in order to make it to the finish line.
If your goal is to own your own truck one day, then allow yourself to dream about what kind of truck you would like. Get a photo from a brochure and place it within your vision near your bunk. Use the photo to remind you of this goal, and set financial requirements and time schedules you will need to meet in order to make that dream come true. Be realistic about the time needed and do your best to put a specific amount away each week. If you fall short one week and have a very good week the next, then set aside the difference from the better week to make up for the week you fell short. Be understanding of yourself, and allow some small reward to celebrate pre selected amounts saved.
The point is no matter your goal, you will find any career more satisfying if you feel you are making progress toward its achievement. Remember that you will more than likely be an independent contractor whether driving for someone else or as an owner operator and therefore responsible for your own income taxes. Speak with your tax advisor about your projected income and expected expenses, and plan to make quarterly payments to your state and the Federal income tax officials. If you do not have an accountant or feel yours may not understand the field you are about to enter, then do a little homework and find tax advisors that specialize in this industry. The money you spend with them can be saved many times over by their knowledge of deductions, and expenses that can reduce your taxable income.
Whether you are in your twenties or your fifties you need to be thinking about retirement. Hopefully for those of us who have more than a wrinkle or two, we have planned for the day when we will either choose or be forced to retire. I assure those who are reading this in their twenties and thirties, that failure to plan now will leave you in a total panic if you fail to prepare for your own future. There are many different sites on the internet that can teach you how as little as $20 a week saved and invested properly can provide a comfortable retirement for those who begin at an early stage. Those of us beyond help at the $20 to $100 a week savings plans, can only try to maximize our investments, and should be thinking about selling anything of value today that may be less valuable tomorrow; of course unless the investment is producing income that cannot be matched or closely approximated without it.
Each day in this industry is a challenge and can be viewed negatively or positively. Each day is a learning experience and when you pay attention you can learn ways to repeat the positives and eliminate the negatives. By making the most of each day, you can learn to conserve fuel, save on meals and put more cash into your pockets. Regardless of your goals you should attempt to save every possible penny without making your life on the road miserable. There are many ways to have a few little treats without spending the many times exorbitant prices charged in most truck stops. Savvy drivers shop at discount stores like Wal-Mart for many of their needs. Soft drinks and bottled water can be bought by the case and taken aboard your truck at affordable prices. Snacks and meals can be prepared in your microwave and many drivers carry small grills for outdoor cooking. Aside from fuel, food is the most the most expensive item for all drivers.
The amount of money that can be saved each week by preparing your own meals can have a tremendous impact on your bottom line. If you enjoy snacks, buy them in bulk and carry them with you. Most expedited trucks have refrigerators that can keep milk and other liquids cold, and coffee can be made in your sleeper. Having snacks, soft drinks and coffee readily available will save you some serious change each week. By establishing a savings goal and having devices like IRA’s and other tax deferred investment programs, an individual or couple in this or any career can prepare for their retirements and take pleasure in knowing they will be comfortable in their later years.
Drivers in general probably rank in the top ten professions of those who have little if anything to show for their work. The temptations to spend a dollar here and a dollar there are encountered many times each day. Gaming machines, overpriced food and snacks, fast food, fuel from overpriced pumps, improper use of Comdata cards, cell phones, WiFi*, unnecessary toys, sparkling chrome items, fancy mud flaps, fuzzy dice, expensive CB equipment, electronic do-das, and lot lizards are only a few of the spoils available designed to part the foolish driver and his money. Some drivers succumb to many of these temptations, and find themselves living from paycheck to paycheck. Don’t become one of them. The money wasting decisions you make today will leave you financially challenged for years to come.
If you have decided against the advice given to enter this industry as a driver and have made the decision to buy a truck, then I do have additional advice for you.
First of all, do not be in a hurry. The only person that benefits from your over anxiousness is the truck salesman. Buying a truck is a completely different challenge from buying a car. Cars have MSRP’s that are normally within a certain reasonable percentage of the price for which the car can actually be purchased. Truck MSRP’s are totally obnoxious. Many will show you the MSRP and give you a great deal by discounting that price by 10% or even 20 %. Sound like a good deal? NOT!
Where truck pricing is concerned, there is little if anything that is out in the open. There are dealers specializing in “Expediter Trucks” that have them advertised for massive profits and some will not budge from those prices. There are dealers with repossessed trucks on the lot with low mileage, priced above what the truck should have sold for new. Try going to a truck dealer that does not sell expedited trucks and get a price for a straight truck without a sleeper or a box. Shop the same truck by using the internet and price in an apples to apples comparison with several dealers, and don’t be bashful about telling one dealer what another quoted you. Play each dealer until you finally hear...”I can equal that price, but I cannot beat it.” Now do the same with the sleeper companies. Each sleeper manufacturer will have their own specifics that make their sleeper far superior to the next. Do you best to find the size you need, then look at the finished product assessing which best suits your needs at the lowest price. Repeat the entire process for the box and when you have all three priced, compare the figure to the pre-assembled “Expediter Trucks”.
Will you find a major difference? You can bank on it. In fact, you should bank on it, with the difference placed into the cost of the truck or into the bank. But there are other alternatives. Some “Expediter Trucks” can be had or ordered for reasonable prices when the dealers know that you have done your homework, and will not stand still for a fleecing. Selling you a truck at a reasonable profit is to them a viable alternative to missing a sale altogether. I know of one dealership that will come down 2 or 3 thousand on a truck that should cost 15 thousand less than their price, and will not budge from there. There are many trucks on the road from this dealer and those who bought them will find out at a later time that while thinking they got a good deal, they actually overpaid by a minimum of $10,000. Good deal... I think not.
You will also find that there are dealers who claim to have great deals on expediter vans. These base units vans with small conversions that add thousands of dollars. Normally these vans include all the smaller items needed on the road, but buyer beware. These dealers are charging the full listed price for both the van and the conversion. One dealer in particular adds six thousand for a fold down bunk with a fan in the roof. A different dealer claims great deals on Sprinters and offered me a 2004 at three hundred above invoice. I purchased an identical 2005 Sprinter one week later from a dealer some distance away from this centrally located dealer, for three hundred below invoice, realized a six hundred dollar savings and have a current model. We will perform a complete conversion on this van including m/w, tv and refrigerator for about the same cost as the dealer selling his basic fold down bunk with a fan.
Used trucks are very similar to used cars. Those with low mileage and a few months old will bring the highest prices, but should reflect significant reductions for age and mileage accordingly. Some do...some don’t. There are dealers who have connections to specific carriers that can and will gladly arrange financing, regardless of your credit. That arrangement in itself should fire a very loud warning shot directly over your head. All you need is a few thousand down and a valid CDL. What you will be encountering with this, is an arrangement that will tie you to the carrier that you sign on with and may at first glance look to be a good deal. If you decide that you no longer wish to drive for that carrier you will have to terminate the arrangement and the full amount will become due on demand. So what’s the big deal? More than likely you will be buying a used truck as the second, third, or fourth owner. You will agree to pay in some cases tens of thousands of dollars more than the truck is worth. If you find your income does not allow you to make the payments (very likely), the truck will be repossessed and the cycle will be repeated. Until the truck is resold you will be contacted on a regular basis asking for you to make good on the loan. Failure to do so will require some drastic measures on your part...like bankruptcy. As I stated before, do not get in a hurry. If you don’t take the time to learn about what you are buying, you will be badly burned.
The following formula is my personal method to value a used truck. If you check the values of the used trucks on lots across the country you will find the sales prices much higher, however if you are in a position to sell a used truck to these same lots, the price you will be offered will be even less than the figures you see below. Beware, the price you pay for a used truck will determine your ability to turn a reasonable profit for your efforts.
In my opinion a used class 7 truck could be valued fairly in the following manner. Determine the original purchase price and remember not to take a dealers word. Research the going rate at the time of the original sale and if from one specific dealer you can deduct at least $10,000 from that starting price. If well maintained, a truck should be worth about 25% of the original purchase price when it reaches 500,000 miles or 5 years of age. I use an accelerated depreciation schedule based on my own personal experiences with routine repairs I have had over the lifetime of many trucks. This system is directly related to the vehicle warranty and expected part replacements.
$85,000 truck on original purchase
residual value at 5 years or 500,000 miles is 25% of $85K or $21,250.00
add this figure to the present depreciated value...
1 year or 100,000 miles deduct one 40% of the (original price – the residual value) whichever comes first
or 85k-21,500 = $60,500 x 60% = $36,300.00 + residual = $57,550.00
2 years or 200,000 miles
$60,500 x 40% = $30,250.00 + residual = $45,450.00
3 years or 300,000
$60,500 x 20% = $12,100.00 + residual = $33,250.00
4 years or 400,000
$60,500 x 10% = $ 6,050.00 + residual = $27,300.00
5 years of 500,00 $21,250.00
It has always been my advice to live as free from debt as possible. Any used vehicle purchased after the first two years of service or after the 200,000 is a gamble as most will have no warranty and the repairs and replacement of parts that will wear out on these trucks can be very costly. It is my belief that present used truck prices are artificially high, because of the demand created by the increase in expedited freight of the last two years, and that you will soon see these prices dropping. I predict that many expediters will soon be tossing in the towel, unable to make high payments on overpriced trucks while faced with the ever increasing fuel prices and a repressed demand for our services. So if you cannot buy a new truck, or wish to get a late model truck which is fairly priced, just hang in there until about July or August. Even when these opportunities are presented, it is still advised to avoid buying a truck until you have at least two years in the industry.
These articles were written for those considering entering our industry. Individuals who have related experience in driving should pay close attention to the advice given and understand that these articles are not meant to discourage you in any way from entry into the career that supports all of us on this site and thousands of others. The articles are written to show the reader that this business requires thought, discipline and business savvy to succeed. It is not as simple as buying a truck and collecting checks. We invite anyone to use our site to inquire about any issues that you may have, or questions regarding the lifestyle you can expect. The site is filled with active and concerned individuals with your best interest in mind.
Thumbnail recap for wannabes...
1. Do not buy a truck
2. Do not buy a truck
3. Carefully consider the lifestyle adjustments you will have to make and decide if you will begin as a solo or team. Be certain to discuss these adjustments with your family.
4. Determine if you want to drive as a solo or a team knowing again the adjustments necessary.
5. Choose the carrier first based on your driving desires as stated in part 2.
6. Choose your owner carefully using the guidelines given in part 3.
7. Do not buy a truck.
8. If you choose to ignore the advice given enter as an owner operator use the information in part 4 to determine a fair price and be very careful regarding financing options.
9. Do not buy a truck, until you have at least 2 years experience in the expedited industry.
10. If you follow the advice given here you will be making informed decisions about your new career. We wish you luck in the world of expediters and invite you to the forums of Expediter
by: Tom Robertson, Editor
April 19, 2005
This article is property of Expediter World™ ©2005-2006