Owner-operators are seeing strong freight volumes now but should prepare for a “freight cliff,” according to Todd Amen, CEO and president of American Truck Business Services (ATBS).
That was one of the messages from Amen during ATBS’ annual Independent Contractor Benchmarks and Trends conference call on Wednesday.
The call was a recap of data collected from ATBS’ clients. Amen provided insight on 2019 benchmarks, including net income, average miles driven and freight rates, among other things.
Amen said the coronavirus pandemic has provided the trucking industry with a “huge opportunity” to move freight.
“Right now, trade is strong, America is hoarding goods. We’re buying toilet paper and everything that you can buy to be in our home for the foreseeable future; shelves have to be restocked,” Amen said. “But a lot depends on how long the coronavirus epidemic keeps us all locked up.”
Amen said if the pandemic continues for months on end, many Americans will be out of work that much longer, affecting consumer spending.
“Ultimately, what happens to the sentiment in America is we close our pocketbooks, we’re going to stop spending money because we need to survive,” Amen said. “We’re going to stop shopping except for the essentials. That means freight stops moving.”
Amen said owner-operators can prepare for “darker days” by drawing down on lines of credit from their bank, as well as negotiating with banks, suppliers and vendors on how they can extend payments.
ATBS, which specializes in providing financial assistance and advice to owner-operators, including tax preparation, has worked with more than 150,000 drivers since 1998.
Amen said owner-operators took a hit during 2019 because of economic conditions and other factors.
“It was a tougher year, the population shrank by just over 3%, we lost about 4,000 owner-operators,” Amen said. “But when you keep that in perspective, in 2018, we grew by 10,000 owner-operators, up 8% over 2017. The net between the 2018 to 2019 is we’re still up about 6,000 owner-operators.”
Other economic conditions Amen discussed included the average owner-operator net income in 2019, which was $63,722. It was a decrease of around 2% from 2018 net income of $65,000.
Amen said the slight decline does not reflect a bad year, considering how tough the freight environment was for most of 2019.
Owner-operators also saw an increase in the cost of insurance during 2019, as well as the average cost of truck payments, Amen said.
The average owner-operator truck payment has gone from around $1,750 monthly 15 years ago to $2,400 in 2019. The average cost of insurance was around $12,500 last year.
Overall, Amen said owner-operators are driving less miles and making more money than they were 10 to 15 years ago.
Drivers have gone from making 35 cents a mile to making almost 70 cents a mile, from making $4,000 a month to making close to $5,500 per month, and from driving 139,000 miles to driving 100,000 miles per year, Amen said.
“It’s still a tough job, but it’s gotten much better in the last 15 years, being an owner-operator,” Amen said.