If you're about to finance a new fire truck - whether by lease purchase, loan, or bond - it helps to know what to expect.
It can be daunting to wade into a world you don't know. We'll help you be prepared for the financing experience.
Here's what to expect #5 - Standard terms and conditionsIt's easy to focus so much on the dollars and cents that you miss your responsibilities under a fire truck lease purchase agreement. And some unscrupulous lenders will even use the "fine print" to take more money from you. So, the deal you think you got doesn't exist.
Here is what a standard fire truck lease purchase will include:
- Insurance requirements. You will have to provide insurance on the fire truck at all times. Insurance to both to repair the truck after an accident and liability if the fire truck causes damages to other people or property.
- Tax exempt language. Most fire truck lease purchases are completed using low, tax-exempt interest rates. And the IRS has specific rules about what qualifies for these lower rates. You should expect to see some language about your use and operation of the fire truck that ensures the financing remains qualified.
- Declarations about you. Only certain entities qualify for low, tax-exempt interest rates. You should expect to certify that you meet these requirements.
- Default language. You should expect to see a list of things that will cause the lease purchase to default, or violate, the contract. Most common types of default are non-payment, lack of insurance, unrepaired damage, or losing the tax-exempt status. And there should be a just process of correcting the default such as a payment grace period before your truck can be repossessed, for example.
- Payments. There should be language setting forth exactly how much you pay each payment, what your remaining balance is, how much interest you are paying, and what is the amount if you want to pay off the truck early. This is the area that most unscrupulous lenders will use to grab more of your money so pay particular attention to these clauses in your contract.
SummaryMost fire truck lease purchase terms and conditions are common sense. But I talk with departments who have contracts with very costly and difficult terms at least once a week. And they can't get out of them. So, pay close attention to what you are agreeing to before you sign.
John R. Hill