Finance Fire Truck Purchase

At some point in buying a fire truck, someone asks the question "How should we pay for the truck?"

We're not talking about financing, we're talking about how to pay for it.
 

The 3 payment choices

There are only 3 choices of how a fire truck is paid for.

1.  Get someone else to pay for it.   From AFG grants to other state and local programs, grant funding is a wonderful way to pay for a new truck.  It's important to understand the terms of the grant so you won't jeopardize the money.

2.  Use existing savings to pay for it.  If you've been saving up with a funded replacement reserve or just have enough money in savings, just writing a check for the truck is a nice option.  Beware that you don't deplete your reserves to a dangerous level (usually calculated as 6 months of income).

3. Borrow money to pay for it.  If you aren't able to take advantage of the previous 2 options, then you'll probably borrow money to pay for the truck.  There are many options to borrow money such as bonding, state and local loan programs, and lease purchase agreements.  When you borrow, you are setting in motion a financial plan that will affect your department for years.  It's important to know what you are doing today will affect your department's future.

Click here to learn more about fire truck borrowing best practices and common mistakes.

Summary

Every truck is "financed".  Meaning it's paid for.  Once you understand the options and the pros and cons of each choice, financing your new truck becomes easier.

Stay safe!
John R. Hill
President
First Bankers

Budget Fire Truck Purchase

After the need for a fire truck is established, the next financial phase is to budget the purchase.  And that involves answering a second question:

How much can we afford?

There are 2 ways to approach this question.

1. You know your payment amount and need to set your truck budget. If you've recently paid off a loan, or have been setting funds aside for the purchase, or have new income to pay a payment, you know a payment amount you can afford and need to calculate how much truck that can buy.

2. You know the cost of the truck and need to set your payment budget.  You've selected the truck and know its price.  Then you need to set up a payment budget for approval.

More about fire truck budgeting

It becomes easy to extend the number of years to lower the payment.  That can cause a future financial problem for the next generation of department leaders.

Your loan term should be balanced among your payment budget, life cycle of the truck being purchased, and the timing of next major capital purchases.  If you miss something, you may be preventing a future purchase.

Summary

Budgeting a fire truck purchase includes a lot of things to consider to do it well.  Miss something and you'll pay a price later.

Get your FREE Fire Truck Budgeting Kit.

Click here to get your FREE kit today.



Stay safe!
John R. Hill
President
First Bankers

Justify Fire Truck Purchase

When you are justifying a fire truck purchase, you only have to answer 1 question.

Is it cheaper to buy or not to buy?

Although a simple question, the math can be a bit complex.
 

First, you must identify what your board what your board would do rather than buy the truck.

There are only 3 "no-buy" scenarios (click here to learn more).  And none of the 3 scenarios are free, although your board will tell you they are free. It's important to know what the cost of each scenario is.

Second, you must focus your discussion only on the justification part of the purchase.

It's easy during the justification conversation for people to jump ahead and ask "How much will this cost?" or "How can we pay for this?"

The cost and pay questions are very important but those questions are for later in the purchase process.  Avoid answering those questions this early.  Once the idea of exploring buying is acceptable, then start to focus on the cost and pay questions.

By focusing only on the question "is it cheaper to buy or not to buy?", you're conversation is focused and will be more effective.

Lastly, you must develop your cost-analysis and justification plan based on why the board does not want to buy.

And each of the 3 scenario has a different cost analysis.  Each no-buy decision has a cost.  Use the wrong analysis and you jeopardize the purchase.  Measure the true costs of buying or not buying and your chances for success increase greatly.
Especially in these times, a financial case study is essential in justifying a fire truck purchase.

We offer a FREE Fire Truck Justification Kit to help you do the math for the 3 "no-buy" scenarios.

Request your copy by clicking here.

Stay safe!
John R. Hill
President
First Bankers

3 phases of a fire truck purchase

You need a new fire truck.  And there are 3 separate financial phases of a fire truck purchase.

Each phase has different financial questions to answer and objections to overcome.

We'll look at each phase over the next 3 weeks.

So, what are the 3 phases?

Every fire department must justify, budget, and finance their purchase.  And savvy departments understand that each phase has its own life and must be addressed on its own merits.  They know what phase they are in.  They don't jump ahead or move to the next phase without successfully finishing the current phase.

Summary

Buying a new fire truck is a complex process. Most departments easily handle the truck part - designing the truck they need.  Most fire departments don't have the experience to handle the financial phases with ease.

Stay safe!
John R. Hill
President
First Bankers