Becoming an Owner Operator: Financial Considerations

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You’ve taken into account the personal considerations (family, health, etc.) of becoming an owner operator and have obtained—or are on the way to obtaining—your commercial driver’s license (CDL). That means it’s time to tackle your finances and form a business plan that will ideally prevent you from going bankrupt within your first year on the road.

Trucking Equipment

First things first, if you’ve completed your CDL testing, congratulations! If not, be sure to complete your testing before proceeding in becoming an owner operator—you don’t want to be stuck with a truck you aren’t licensed to drive.

Assuming you’re a CDL holder, the next step is to look into getting equipment. Arguably, this will be the most expensive part of the process. New trucks typically sport a price tag around $150,000 with payments ranging from $1,000 to $2,000 a month. If you don’t have it in your budget to buy brand new, buying used is another option. Used trucks can be found for around $40,000, depending on the make, model, year, etc. We will explore purchasing trucking equipment further in our May 4th post.

It is very important that purchasing, or at least looking into the purchase of equipment, is your next step after getting your CDL. If you can’t afford to buy a used truck, then now is not the right time for you to become an owner operator. You may decide to take out a business loan, but be careful to avoid taking out too much money. Remember, new truckers usually only make $30,000 to $40,000 a year.

Business Loans and Licensing

In order to get a business loan, you must get a business license. First, apply for an Employer Identification Number (EIN) at IRS.gov (free). The second step depends on whether you’re planning to drive interstate or intrastate. If you plan to only drive within your state of residency (intrastate), then you will need to visit either your state government’s website or office to obtain a license (i.e., In Minnesota you will need a Property Carrier Registration; no fee). Along with requesting a license, you will be required to sometimes (depending on the state) attend an Initial Motor Carrier Contact seminar within 90 days of receiving the license and register with the office of your state’s Secretary of State.

Choosing to drive in more than one state (interstate) gets a little more complicated. You will need to be sure that you are properly registered in every state you choose to travel through, even if you are not picking up or delivering a load in that state. For more information on interstate trucking registration and permits, click here.

Owner Operator Insurance

Once you’ve become an established business, it’s now time for the fun part—insurance. Luckily, trucking insurance isn’t as painful as it sounds. If you choose to work with an independent agency, instead of buying direct from an insurance company, you’re policy will be tailored to your specific needs. This means you will never be oversold or undersold. Due to the complexity of commercial trucking insurance, our August 3rd post will be dedicated to the topic.

Living Expenses

To wrap up the financial considerations portion of our Becoming an Owner Operator series, we will tell you what we tell all our new owner operator clients:

  1. Make sure you have enough money to operate until you get your first check (30-90 days). Your biggest considerations should be fuel, truck maintenance, and equipment payments (if you choose to lease).
  2. Make sure you have enough money to live off of until you get your first check. While you’re life is on the road now, there are still mortgage, electricity and other payments that must be made at home. Be sure to budget for those expenses.
  3. Expect the best, but prepare for the worst, even if you buy a new truck. While it won’t cost you financially to repair under warranty, time in the shop is time not spent working on the road. Therefore, allocate some of your funds toward a “Worst Case Scenario” wallet.

For more information, please continue to follow our Becoming an Owner Operator series. Our next post will be May 4th, and it will focus on purchasing trucking equipment. If you can’t wait until then, please feel free to contact Truck Writers for more information today!

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