What were the hottest topics on Monday Transportation in Minutes for 2019? Here they are.
Truck insurance rates are getting outrageous. Doesn’t anybody realize that trucking is in a recession, that freight rates are dropping too quick, that new truck sales are anemic? And yet two Congressmen, Democratic Congressmen have introduced a new bill call Improving National Safety by Updating the Required Amount of Insurance Needed by Commercial Motor Vehicles per Event Act of 2019. Look, the required minimum right now for liability insurance for a trucking company is 750,000. These two yahoos are talking about taking it up to $4.8 million. Nobody can handle that.
There’s so much talk all the time about how important is your credit score? And the answer is very important. Bad credit costs you, good credit saves you. So I wanted to give you an example of truly the cost of bad credit versus good credit when it comes to purchasing a truck for your transportation business. Here’s the example I built out for us today.
If you were to buy $150,000 truck and let’s say that you had good credit, let me define good credit. In fact, let me go ahead and give you the range of credit. The lowest credit score you can get is 300. The highest credit score you can get is 850. Everybody knows that North of 700 is considered good credit. So the goal should be to get your credit score to be North of 700. One the most searched for keywords for transportation companies is how to get financing with bad credit. It’s unbelievable how many people are searching how to get financed if their credit is damaged. That’s today’s episode. Why? Because we know a lot about financing good credit and bad credit transportation companies.
It’s important to understand what AB5 is because the implications are massive for the transportation industry. So let me read what the AB5 ABC test is. “Under the new ABC test however, the California Supreme court has shifted the burden to employers to prove that workers are not employees. Under the test, an individual is presumed to be an employee, unless the company can prove all of the following: A) that the worker is free from control and direction of the hiring entity in connection with the performance of the work.” But wait a minute, I’m a trucking company and I’ve hired an independent contractor to truck, to pick up a load of freight here and drop it over here. Sounds like the trucking company is directing the independent contractor. It’s a massive question that I have been asked thousands of times over our 25-year career here at Commercial Fleet Match. “Should I buy or should I lease my equipment?” That seems to be the big question. And I can’t answer the question unless I really understand four things about your buying patterns and the needs and desires of your business and how you’re going to use the equipment.
The first is are you a payment shopper or are you an equity builder? Because if you’re a payment shopper, you probably need to lease your equipment. Leasing will have a residual value or a buyout option at the end. That means that you will finance less. That means your payment will be lower. If you want to buy the equipment and finance the full amount, your payment will often be higher than leasing. So the first thing is, are you an equity buyer or are you monthly payment by buyer?
Thanks for watching this far away. We normally put a bonus clip in here, but we’re actually giving you a teaser of what happens next week on Monday Transportation in Minutes. We’re going to give our predictions of what happens in 2020 in the transportation industry, and you’re not going to believe how positive we are about 2020.