Your Guide to Owner-Operator Lease Agreements

Trucking companies and owner-operators often benefit from working together. Carriers can expand their fleet by contracting independent drivers. Contracting allows owner-operators to increase income, find more work, and gain experience. An owner-operator lease agreement contract formalizes the terms between trucking companies and independent contractors. This legal document outlines terms and sets expectations for all parties.

Learn all about owner-operator lease contracts and which is best for you. Careful preparation ensures a successful agreement that works for everyone.

What is an owner-operator lease agreement?

An owner-operator lease agreement is a legal contract between a carrier and an independent truck driver. Carriers may want to hire drivers on a contract basis without permanent employment. Both parties sign an owner-operator agreement detailing responsibilities and obligations. It outlines the terms for the driver to provide services with their truck or lease from the carrier.

Depending on the agreement, the company might pay the driver to haul goods on their behalf. Or, the driver might pay the carrier to lease a truck with the option to own it or return it at the end of the contract.

Typical terms in a lease agreement include:

• Payment terms
• Lease duration
• Equipment use
• Maintenance duties
• Insurance requirements

Types of owner-operator lease agreements

The type of lease varies based on how drivers operate. There are three types of agreements:

1. Lease-purchase or lease-to-own agreement

In a lease-purchase agreement, an owner-operator leases a rig from a carrier with an opportunity to buy it when the lease ends. A lease-purchase agreement works as follows:

• The driver makes monthly payments to use a carrier’s truck.
• During the contract, the truck remains in the driver’s possession.
• At the end of the agreement, the owner-operator can choose to own the truck.

This method is ideal for new owner-operators who don’t have their own truck. They can lease a truck without needing full capital or perfect credit. Drivers just starting out can get behind the wheel to earn income, gain experience, and build their reputation. The monthly payments contribute toward vehicle ownership.

The lease-purchase agreement should include lease length, the year of the truck, and maintenance or repair responsibilities.

2. Lease program

A lease program is similar to a lease-purchase agreement, but the driver returns the truck at the end of the contract.

Here’s how a lease program works:

• The driver enjoys lower monthly payments than they would with lease-purchase agreements. However, the driver might need to make a down payment or meet credit requirements.
• The owner-operator keeps the truck for the duration of the agreement.
• The leasing carrier maintains and repairs the vehicle.
• At the end of the contract, the company may renew the agreement, lease the driver a different truck, or terminate the agreement.

3. Lease-on agreement

In lease-on agreements, an owner-operator leases their services and rig to a freight carrier. This type of contract works well for drivers who own trucks but want help finding freight. A lease-on agreement works as follows:

• The driver leases their truck and services to the company for freight hauling.
• The carrier handles paperwork and fuel tax.
• The driver is responsible for maintaining the equipment.

The owner-operator can focus on driving while enjoying the carrier’s resources. The company also finds freight and jobs and provides dispatching services.

Key components of owner-operator agreements

All agreements should include these elements outlined by the Federal Motor Carrier Safety Administration (FMCSA):

1. Parties involved

Basic information includes the names of the trucking company and owner-operator. All parties sign to confirm that they understand their responsibilities.

2. Agreement length

This details the start and end dates of the contract. It also covers possible extensions for weather-related delays or loading and unloading issues.

3. Equipment used

Equipment used for transport might include trucks, trailers, liftgates, and tiedown devices. This clause states who provides and pays for the specified equipment.

4. Control and possession

The trucking company controls the owner-operator and any equipment during the leasing period. The owner-operator must follow the trucking company’s rules during the term.

5. Compensation

A trucking company might compensate drivers for hauling specific cargo in many ways. The agreement must specify the method.

Here are some guidelines to follow:

• Payment method: This clause must include the rate and method of payment. The carrier might pay the contractor per mile or based on a percentage of revenue.
• Payment period: Ensure the payment period after proof of delivery is 15 days maximum.
• Right to inspect: The owner-operator has a “right to inspect” carrier billing for revenue-based payments.

6. Legal obligations

The lease must specify the liability and cargo insurance the trucking company provides. It must also detail the party responsible for insurance, permits, and paperwork. For example, the driver needs information on company insurance policies. Legal clauses may also include information about mediation or arbitration.

7. Termination procedures

The lease agreement must outline specific termination procedures if problems arise. This section includes the circumstances for ending the agreement and the process of removing the carrier’s name.

8. Damage provisions

The lease should specify responsibilities for cargo or property damage. It must state any deductions to the driver for damage at the origin, destination, or in transit.

Receipt of equipment process

After signing, both parties complete a “receipt of equipment” statement. The truck is now under the carrier’s control. The carrier can inspect the owner-operator’s equipment to ensure it meets regulations. According to the FMCSA, the trucking company is responsible for driver and vehicle compliance. Any driver violations become part of the company’s safety data.

The proof of lease, trucking company’s name, and Department of Transportation (DOT) information must stay in the vehicle.

Find more high-paying loads.

With the paperwork out of the way, the next step is to find and book high-paying loads. Owner-operators and carriers can search for freight on the Truckstop Load Board. Features include rate estimates, side-by-side load comparison, and a best-paying load search.

When you’re on the move, Truckstop Go™ gives you load-searching power at your fingertips. View loads in real time and book in an instant. Carriers get instant load booking with trusted brokers free with a load board subscription.

Truckstop creates innovative technology that helps you move more freight faster and tackle every step of the freight lifecycle with ease and speed. From finding loads to invoice factoring, our platform delivers it all. For more information, contact us to schedule a free demo.