Wednesday, November 15, 2017

Fire Truck Financing: The Basics

Fire truck financing is more complex than car or house financing

Over the next few weeks, we'll share what you need to know.

The basics of fire truck financing

 

First, fire truck financing is usually in the form of a lease purchase agreement. 

This type of agreement is 99% like a loan with one key difference.  You have the option to cancel the agreement each year.  By doing this, most departments don't have to count the payment against their debt limitation or go through the legal process of borrowing money (per state legal requirements).

Second, you have a lot more choices than car or house financing

This is key to knowing how to avoid wasting money.  You can chose whether to pay monthly, quarterly, semi-annually, or annually.  You can chose when you want to start payments.  You can chose the amount of your down payment.  You can chose how long you want to pay off the fire truck, between 3 and 15 years. 

 

Lastly, you qualify for lower, tax-exempt interest rates

Since you are a government agency (or perform a public function if you are a volunteer fire department), you don't have to pay higher interest rates like a person or corporation).

Summary

There is lot to know about financing a fire truck.  Over the next few weeks, we'll share what you need to know and how it helps you.

Stay safe!
John R. Hill
President
First Bankers

Wednesday, November 8, 2017

Is your fire department going extinct?

It's no secret that the fire service is under extreme financial stress now

Fire departments budgets are being scrutinized like never before and politicians are clamoring for ways to save money for this expensive public service.

Just this past week, another fire company was de-funded.  Read the article by clicking here.

So how can you ensure your fire department will survive the new fiscal reality?

  1. Be fiscally open.  Don't hide what you receive and what you spend.  I see many fire departments try to hide their finances even while approaching people about donating funds. Share your financial records freely, understand them, and be able to explain them to everyone.
  2. Be fiscally responsible.  Show your stakeholders you spend their money wisely.  It takes a lot of money to run a fire department.  Don't be ashamed that it does. But show that you are trying to maximize the "bang for the buck".
  3. Be fiscally reasonable.  It's easy to fall into nearsightedness and only think about yourself and your needs.  But remember that someone else is providing the money and you have to work with them over the long run.
  4. Be fiscally prepared. A fire truck is a huge purchase.  Take the time to explain clearly and allow the payers to come to the decision that it makes financial sense. A decision like this can take a long time.  Prepare to educate and help the payers come to their decision.

Summary

I've written a lot how the fire service economics have and are changing. The major trends of costs increasing faster than revenues, more and more expensive equipment, and the movement from volunteer to a paid labor force can be scary.  If you want to survive the new reality, you must know how to work with your stakeholders.

Stay safe!
John R. Hill
President
First Bankers

Wednesday, November 1, 2017

New Fire Truck: Vendor provided financing - The Myths

The large fire apparatus manufacturers such as Pierce, Rosenbauer, E-One, KME, Ferrara, etc. offer financing for their apparatus.

Full disclosure:  Our company serves some fire truck manufacturers and also helps directly with the fire department no matter the manufacturer.  We've seen it all.

 

What are some common myths about vendor provided fire truck leasing?

There are a few I hear all the time:
  1. The bank and the manufacturer are the same company.  That's never the case.   They are always separate companies.  They have a partnership of some sorts but they are not the same company.
  2. If you have problems with the truck, you don't have to pay the payments.  This is not true.  You will find in the fine print of every fire truck financing contract some language that the bank does not warranty the truck and that you can not stop payments because the truck is not performing to your standards.
  3. The bank is working for my best interests.  That is not necessarily the case.  I see this especially in the offering of prepayment discounts.  Not all discounts save money and a vendor related bank may not share that information as it jeopardizes the relationship with the vendor.

Summary

Every fire truck manufacturer will offer financing just like a car dealership.  There are benefits and drawbacks to using them to finance your fire truck.  It's not a simple, one way is always better choice.  But it's important to understand the true nature and not believe the myths.

If you want to learn more about financing fire apparatus, get your free Fire Truck Financing Kit by clicking here.

Stay safe!
John R. Hill
President
First Bankers

Wednesday, October 25, 2017

New Fire Truck: Vendor provided financing - The Con's

The large fire apparatus manufacturers such as Pierce, Rosenbauer, E-One, KME, Ferrara, etc. offer financing for their apparatus.

Full disclosure:  Our company serves some fire truck manufacturers and also helps directly with the fire department no matter the manufacturer.  We've seen it all.

What are the drawbacks to financing your new apparatus with the manufacturer financing company?

There are some concerns about using the manufacturer financing company.

First, who is the ultimate customer?  If the vendor is financing several trucks with the financing company each year and your fire department is only financing one, who has ultimate influence over the financing company.  It's only natural that the financing company would choose to help the vendor more than the department if there were some advantage to be had.

Second, you may not get objective advice.  This goes along with the first comment.  The manufacturer financing company may not help you do the math in calculating the savings from a prepayment, for example.  If the manufacturer is pushing prepayment, the finance company may not tell you if it's a bad deal if they are connected to the manufacturer.

Finally, you may not get the best deal.  There is always a price for convenience. And the financing company may not give you the best deal if it thinks you won't shop around.

Summary

There are no hard and fast rules if financing your new fire engine with the manufacturer is best for you.  Sometimes, it's the best choice.  Sometimes, it's not. Next week, we'll look at the myths surrounding manufacturer provided fire truck financing.

If you want to learn more about financing fire apparatus, get your free Fire Truck Financing Kit by clicking here.

Stay safe!
John R. Hill
President
First Bankers