In today’s episode of Freight Broker Live we talked about some ways a carrier can fight back against operational costs should they decide to park their truck and wait out the low rates. As I mentioned in the show, any carrier who can afford to sit until the low freight rates start to increase should, in my opinion.
We have an over-abundance of trucks on the road, which is one of the reasons load rates are low. Taking your truck off the road means one less truck out there, potentially causing a broker or shipper to have to pay more to attract a carrier. The second and most important is that taking loads under your cost to operate literally makes zero sense, if you can avoid it. Why put the miles on your truck if you are literally working to lose money by taking loads under your break even?
The solution:sit your truck. With your truck parked you limit your exposure to these unprecedented times. Your variable costs disappear for the most part as you no longer have to worry about fuel, maintenance, regular service, etc. Your fixed costs are another story. Fixed costs include truck and trailer payments, insurance payments, registration, etc. While you probably can’t eliminate your burden completely, there are steps you can take to lessen this burden.
The first, talk to your lenders. Nearly every lender we have heard of has some sort of plan in place to assure their clients are protected. Call your lenders and ask what they can do. Ask if you can extend your loan, allowing you to postpone payments. Ask about plans they have. Be weary of offers to “skip” payments as the balance of these skipped payments is usually due as soon as the payments resume.
Insurance is a bit more complicated. We reached out to Brittany Smith, Director of Commerical Trucking with Insurance Unlimited to ask what options were available to carriers who were thinking of parking their trucks. She provided three options for a carrier can do; defer your payment, reduce your payment, or cancel your coverage. Brittany broke down each option below:
Deferred payment options: To defer your insurance premium means to postpone the due date out to a further date. This is an agreement worked out by you and your insurance carrier, if they are direct bill (progressive) or your finance company if they are agency bill (NICO, Canal, Berkshire depending on the state etc). This does not lessen the coverages on the policy or cut the premiums, this option is to only extend payment. Remember to get this option in writing from your agency or insurance company.
Reducing premiums: If you need to keep your authority active but you are not working, and are unable to financially afford the deferred payment options you can reduce premiums. A direct bill company like Progressive will reduce the coverages and automatically apply the credit to your billing cycle, resulting in instant financial relief. A agency bill company will take 60-90 days to send the credits back to the finance company and apply the credits, this is not an instant relief option. To keep your authority in place you can reduce auto liability premiums to $750,000 if you are anything other than an auto hauler or Hazmat carrier. Auto haulers and Hazmat carriers must maintain the minimum $1,000,000 in auto liability. You can also remove cargo coverage if you are desperate. We do not recommend that you cancel the physical damage on your truck and trailer and move this coverage to a personal policy unless you are absolutely desperate and plan to reregister your truck. Please talk to your personal lines insurance carrier and get proof in writing that your truck will be covered if you are switching it to a personal use truck. (hotshot trucks only).
Cancelling Coverage’s: If you plan to cancel coverage’s you should speak to your agent first and find out what you would owe on your policy, if you were to cancel thirty days from the date you signed the cancellation form (if federal filings apply). If you have a MC number you have a federal filing. Federal filings require the insured to give a thirty day notice of cancellation. This means you will still have coverage and pay for it a minimum of thirty days, depending on your state. This only applies to the auto liability portion of the policy. Cargo coverage and physical damage can be cancelled without a thirty day notice. If you need to cancel I would recommend speaking to your agent, lessening coverage, cancelling your authority and then signing the cancellation form.
What ever the case, there are steps you can take to assure that you stand a chance at weathering the storm. Do what ever you can and remember, say NO to CHEAP FREIGHT!