Fire Apparatus Financing: Your calculator versus your gut

What's the correct way to make a financial decision? In fact, there are 2 parts and this article will discuss both.

The calculator part
A financial decision always starts with the numbers, the dollars and cents. Will you get more than what you pay out?

This may look like - Should I make a $50,000 down payment to lower my payments?

The calculator will tell you that making a $50,000 down payment will lower your payment $14,000 per year and you'll save over $8,000 in interest costs.

The gut part
The gut part is your comfort level. Can you live with the decision even if it makes financial sense?

In our down payment example, would you feel OK by having $50,000 less in savings even though it saves you money?

It's important to have confidence in your financial decision even if the numbers tell you a different story.

In Summary
You have to live with your gut even if costs you some money. Separate the 2 parts and know what the numbers say and what your gut says. You'll make decisions that are financially smart and comfortable for you.

Stay safe!

John R. Hill
Apparatus Budgeting Consultant
ENVIZION Financial
www.envizionfire.com

Fire Apparatus Financing: The dumbest question

What's your rate? I've heard that question thousands of time. Tens of thousands. And it is the dumbest question to ask even though it feels so right.

The question that is really being asked
Of course, the question that is really being asked is: What will it cost me to borrow money? (So, I can compare everyone and choose the best for me)

That's a very different question than the rate question and here's why the rate question falls short:

1. Rate can be very deceptive. You've seen ads where the "rate" is in large print but the APR and "terms and conditions" is in very small print. That is because the "rate" can be legally and accurately measured several different ways.
   
2. It falls short of calculating the true borrowing cost. In fact, there are 7 Borrowing Factors that control how much you will pay to borrow money. By focusing on only 1 - the rate - you miss the other 6 factors. So, even though you get the lowest rate, your true borrowing cost can be much higher.
3. Bankers are professionals. Do you think that they haven't figured out some way to hide other charges and costs and still present a low rate? If you are starting to think "fees", you've got another factor but are still missing the other 5 factors.

Why do people ask the rate question
Unlike the bankers, you are not a professional. So, you don't know the questions to ask and you rely on a simple question - what's the rate - in hopes of finding the simple answer to a complex situation.

So, what can you do to get good data
When I complete a Purchase Analysis for my clients, they are always shocked how much waste and hidden costs are built into the finance offer. Even with the lowest rate.

In summary
Financing a fire apparatus is a complex financial transaction. When you miss a Borrowing Cost Factor, you can overpay by thousands of dollars. I've written several articles on the 7 Factors and you can find them in the box to the left.

Stay safe!

John R. Hill
Apparatus Budgeting Consultant
ENVIZION Financial
www.envizionfire.com

Fire Truck Financing: Repair or Replace

It's always a tough financial choice: Should you keep repairing and spending more money on an older apparatus or does it make financial sense to replace the truck and buy a new truck?

I recently wrote an article for FireRescue1.com that discusses the 3 factors when making this decision. You can read the full article by clicking here.

The 3 factors are:

1. Operational cost factor. How much does it cost to maintain the apparatus.
2. Intangible cost factor. What is the by-product of a new truck. Better morale? New recruits? Safety? These often overlooked factors should play a part in the decision.
3. Financial cost factor. Does it financially make sense to replace? How much buying power are you losing each year by waiting? Can you ever make up that lost buying power?

In summary, a quality analysis includes:

Most departments I talk to think only about the Operational Cost factor and don't include the other 2 factors. A quality analysis is a complete analysis and includes all 3 factors. Then, when you are presenting the idea of repairing the old truck or buying a new truck, you have all the facts to support your recommendation.

Free offer

I've developed a FREE Repair/Replace Analysis spreadsheet. I'll be glad to send you a copy. Simply send me an email to john.hill@envizionfire.com.



Stay safe!

John R. Hill
Apparatus Budgeting Consultant
ENVIZION Financial
www.envizionfire.com

Fire Apparatus Financing: Rollover problem

Do you know what the worst financial thing you can do when financing fire apparatus? It's called a rollover and it can cost you lots of money and be a sign of major future financial problems.

Here's what the problem is
A rollover is when you combine a current truck loan with a new truck loan. Most rollovers happens when a department needs to be able to afford the payments on the new truck.

If you have to rollover your current loan, it's a sign of two major potential problems.

1. You financed your last truck on the wrong term. A proper financial replacement plan is paying off your past loan before your next loan. That means you are paying as you go.
2. Your revenues are not keeping up with all your needs. When you rollover a loan, you are extending the term to keep payments low. That means you pay longer on depreciating apparatus, you'll pay tens of thousands more in overall interest to finance the truck, and you are being forced to scramble financially to keep your fleet up to date.

In Summary
It's a very bad financial sign if you have to rollover your last loan to afford your new truck. It means that you are never really getting out of debt and you will be paying a lot more money to borrow money.

Stop and think twice about other alternatives before doing a rollover.

Stay safe!

John R. Hill
Apparatus Budgeting Consultant
ENVIZION Financial
www.envizionfire.com