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25/25 Guideline?

ATeam

ATeam

Senior Member
Retired Expediter
In the topic "200k Gross?" RichM and DaveKC both made the point that that net income is more important than gross income. The logic of that is irrefutable.

I recently read an article about truck financing. I'm not agreeing or disagreeing with the point made, but am tossing it out here for debate. Perhaps the discussion will be helpful to people considering a truck of their own. Sorry, I don't recall the magazine or writer.

The article suggested that truck buyers pay at least 25% down on a truck (new or used) and keep the truck payment below 25% of your gross income.

Ladies and gentlemen of the expediting industry, what say you?
 
davekc

davekc

Senior Moderator
Staff member
Fleet Owner
Alot would depend on whether the truck is new or used and what reserves one has after they start. A new truck depreciates more than 25 percent after one year of service. I would keep the payments below that 25 percent margin....especially in todays economy. Paying cash is always the best option.
If a truck grossed 100,000 and you are using 25,000 for payments, that is a weak ratio. Likewise for a 200,000 gross and you are using 50,000 for payments in a given year. It works out ok until you start factoring maintenance and repairs during and when the warranty runs out. It gets worse when you start factoring in fuel costs.
You would be better to take the 50,000 and spread it over two trucks, rather than one.







Davekc
owner
21 years
PantherII
EO moderator
 
davekc

davekc

Senior Moderator
Staff member
Fleet Owner
Very true. It takes time to find decent drivers.


Davekc
owner
21 years
PantherII
EO moderator
 
F

Frieghtlinemike

Expert Expediter
>I recently read an article about truck financing. I'm not
>agreeing or disagreeing with the point made, but am tossing
>it out here for debate. Perhaps the discussion will be
>helpful to people considering a truck of their own. Sorry, I
>don't recall the magazine or writer.
>
>The article suggested that truck buyers pay at least 25%
>down on a truck (new or used) and keep the truck payment
>below 25% of your gross income.
>
>Ladies and gentlemen of the expediting industry, what say
>you?


So if you sign with FedEX as a solo and truck payment is 29k a year you will net What on 100k gross?
Michael
 
jaminjim

jaminjim

Veteran Expediter
$29K a year truck payment? Am I the only one to see a problem with that. On top of that as a single?

With that payment you would be working on the truck for the truck and nothing but the truck. That only leaves 71K, after insurance 64K. Then fuel, Maint., Repairs, tire fund, plates, tolls, phone, the cost of your money, and paying yourself a living wage.

I would not want that kind of payment running as a team.
 
F

Frieghtlinemike

Expert Expediter
"Go get a free copy of this spreadsheet to figure that out.
http://www.ooida.com/trucking_tools/CPM/cost_per_mile.htm

Leo Bricker, 73's K5LDB, OOIDA 677319"

Thanks, I did this but it does not factor for such things as a gen set that causes truck payment to go up and fuel cost to go down.
I will play with it some more.

It shows Maintenance and repair 10k plus a year not incl. washes & tires. Would this be correct on a new truck?


I know I am about 400 mo higher than a lot of folks on a new truck beccause of gen set and ext warr etc but I don't have to pay a driver like a fleet owner does?

I do not want to do this If I can't net 30k before taxes.
That would be 33% of 90k gross/7.5k per month/1875wk
Maybe I am stupid and not seeing something.
Thank you for your help.

Michael:eek:
 
LDB

LDB

Veteran Expediter
Retired Expediter
Mike,

The spreadsheet doesn't have a separate line for the genset but you just include that in the monthly truck payment. You adjust the mpg accordingly as well. I believe the examples they include are based on T/T operations around 78k-80k weight so maintenance etc. are higher than we'd have. The main thing was to have the template and then plug in all your own numbers. That will give you your cpm so you can figure your net. Good luck.

Leo Bricker, 73's K5LDB, OOIDA 677319
Owner, Panther trucks 4958, 5447
Highway Watch Participant, Truckerbuddy
EO Forum Moderator
----------
Support the entire Constitution, not just the parts you like.
 
F

Frieghtlinemike

Expert Expediter
>Mike,
>
>The spreadsheet doesn't have a separate line for the genset
>but you just include that in the monthly truck payment. You
>adjust the mpg accordingly as well. I believe the examples
>they include are based on T/T operations around 78k-80k
>weight so maintenance etc. are higher than we'd have. The
>main thing was to have the template and then plug in all
>your own numbers. That will give you your cpm so you can
>figure your net. Good luck.
>
>Leo Bricker, 73's K5LDB, OOIDA 677319
>Owner, Panther trucks 4958, 5447
>Highway Watch Participant, Truckerbuddy
>EO Forum Moderator
>----------
>Support the entire Constitution, not just the parts you
>like.
Thank you,
I will play with the spead sheet some more.

Michael
 
B

Broompilot

Veteran Expediter
25% of my gross going towards a truck payment. WOW I do not know of anyone of that could make it on that. It is vital for the survival of ones business that you put down even more than 25% or I can promise you this TROUBLE. If you like Pork & Beans than fine try it. When the bad months arrive I can also promise you, you will be asking yourself why you tied yourself up and thats exactly what will happen.

I have a almost new truck, but its still very, very expensive to operate not just fuel, but the two new steers I replaced last week. Road debree. The list goes on and on, there is always something to repair, when I come home after 4 weeks out plus the regular PM. It all comes from your Profit that you thought you had.

My suggestion other than the above is DO NOT BE A SLAVE TO THE TRUCK. This job is hard enough, than to add on financial stress that is probably the single biggest reason people fail.

My rule of thumb, others if you dissagree thats fine, no more than 15% of what you plan on grossing. Easy example 10K a month than $1,500 in truck payment and not for any longer than 60 months. You do this and you should sleep sound at night any more and.......

This is for a single truck not fleets as I can not give any advice on that. I do own another truck but its paid for and if it had payments with a driver in it, well the bank would take any of the profits.
 
F

Frieghtlinemike

Expert Expediter
>Mike,
>
>The spreadsheet doesn't have a separate line for the genset
>but you just include that in the monthly truck payment. You
>adjust the mpg accordingly as well. I believe the examples
>they include are based on T/T operations around 78k-80k
>weight so maintenance etc. are higher than we'd have. The
>main thing was to have the template and then plug in all
>your own numbers. That will give you your cpm so you can
>figure your net. Good luck.
>
>Leo Bricker, 73's K5LDB, OOIDA 677319
>Owner, Panther trucks 4958, 5447
>Highway Watch Participant, Truckerbuddy
>EO Forum Moderator
>----------
>Support the entire Constitution, not just the parts you
>like.
Leo,

I had some more time too spend on the spreadsheet and it seems like a good tool for predicting costs. I plugged in the numbers from FedEx along with my truck payment and other known costs and adj for the tractor vs Straight Truck fees. This is what I ended up with.
76,000 loaded miles = 1.448 per mile gross = 32,774 net to driver
76,000 loaded miles = 1.54 per mile gross = 40,774 net to driver
with a $.46 per mile for any additional dead head miles
Based on 2.96 per gal fuel
Are these numbers reachable with FedEx Solo? Anyone care to respond?
Thanks again for the spreadsheet.
I have cash reserve for several months of slow time as long as it averages out over the year.
Michael
 
B

Broompilot

Veteran Expediter
As a solo with the company you are considering, take the advice of someone who has traveled that road. Find a back up company. Not wanting to crush your dreams, but solos with them have a very difficult time making a living. If this is going to be a hobby than you should be happy.
 
DannyD

DannyD

Veteran Expediter
I have not read what others have said yet, but I TOTALLY agree w/ that. If you can't make your truck payment w/ a weeks driving (max, my criteria would be about 3 days driving) then the vehicle is probably more than you need. There might be rare exceptions to this, ie, a $4000 payment if you're making 3K/ week because there's so much extra by the end of the month.

Still, I think a good rule of thumb is the 25% ratio you mentioned. There's a few other things in this. One is what happens when it's slow? If you're already at 2 weeks work to make your truck payment, & things slow down, now you're at 3 or maybe even 4 weeks work to make a truck payment. That doesn't leave much for paying other things you might owe.

Also, this is a bit more subtle, but I went thru it recently & the feeling that say on the 13th of a given month you're still working to pay your truck payment, kind of nags at ya & the enjoyment of the job isn't nearly the same. In my case it took a job that I enjoyed & made it more of a drudgery. Then what happens is ya don't enjoy the final two weeks of the month as much because now you're "finally" past the payment point. It's more of a relief to be past the payment point than a happy time.

So yea, I'd want a truck that by the 4th of each month (not counting weekends, so maybe as late as the 6th) my truck payment has been made & now I'm out there on the road for me. I totally agree w/ your 25/25 idea. Great topic here. On to read the rest of the replies.

Take care,
Danny
 
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