So, are fire truck prepayments and prepayment discounts a bad deal?Not at all.
I just write about the idea that some fire departments believe that prepaying a fire truck for a discount is a simple and free financial decision.
First, it's not simple.Prepaying a fire truck is a complex financial decision. You are becoming a banker.
And if you are not able to understand or protect yourself, you are taking financial risks that can harm your fire department.
Second, it's not free.I read articles all the time where the fire department understands the discount as just a lower price. It's not. When you give money to get a discount, you are either losing interest on savings or paying interest when borrowing. It's never a free choice to prepay a fire truck.
SummaryThere is a benefit when you prepay a fire truck - a lower price. However, there is a cost in the form of lost interest or interest paid. And you are assuming financial risks when you engage in this transaction.
I am not against prepayments or discounts. I am against making this decision without measuring the entire transaction and making an informed decision.
John R. Hill