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 choicesThere 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.
SummaryEvery 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.
John R. Hill