More and more fire departments are choosing to finance their new fire apparatus.And there are some hidden traps if you don't know what to ask.
Horror story #2Last week, the horror story was tactical - not knowing how to compare financing offers. This week, the horror story is more strategic - the lack of a overall financial plan.
Almost every day, I talk to a caller and ask the question: "What is your financial plan for this purchase?" And the response is usually about the truck, how much pumping capacity, how many seats, why the new truck will be better than the truck it's replacing.
Now, those factors are very important for the purchase but they demonstrate a frequent problem - A lack of a overall financial plan. That means knowing how you plan on budgeting and paying for the purchase. But it also includes how the financial decisions you make today will affect the future financial condition of your fire department.
So, here's some questions to ask yourself as you consider buying a new apparatus:
- What is the most important financial concern? - For example, paying the least borrowing cost, fitting the payment into your budget, etc. For more, click here for the full list.
- When do you need to buy the next truck?
- What other major financial events may happen during the period we are paying for the new truck? - For example, add or pay staff, or other major purchases such as gear or stations.
- What will this purchase do to our financial condition? - For example, eliminate all our savings, or stretch our budget.
SummaryIt's simple, If you don't have a plan, you can easily get trapped in a horror story. You'll make decisions without knowing why they should or should not be made and how they fit into your bigger picture.
John R. Hill