Friday, August 28, 2015

Updated website

 Just a quick note to let you know we've updated our website with a new look and new tools.

See the new website at FirstBankers.net

Stay safe!
John R. Hill
President
First Bankers

Wednesday, August 26, 2015

FIre Truck Lease Purchase - Interest Rates

Are you under the impression that comparing fire truck lease purchase offers is simple because all interest rates are the same?

That's a false assumption and this article will explain why.

Here's why not all interest rates are the same

First, interest rates are communicated differently.  Your interest rate could be legally expressed as a simple interest rate, APR, or effective rate, among others.  All have different payment amounts and total borrowing costs.  This means that even though you get the same rate from each bank, the payment would be different as each bank may use a different rate expression.

Second, your interest rate can be calculated differently.  The interest can be compounded daily, month, annually.  Each affects how much you pay.  The interest rate can be fixed, variable, or fixed reset which means your payment may change in the future.  A variable rate is usually lowest but can change, perhaps costing more in the future.

Finally, and this goes back to last week, your interest costs may be affected by the terms and conditions of your lease purchase contract.  If your terms require you to pay every cent of interest no matter if you pay early or not, the interest rate you were told is grossly understated.  I talk to fire departments monthly who have contracts like this.  Or, if you are required to only pay off on a certain date (again, happens frequently), your interest rate is understated.


Summary

While it would be nice and simple if you could just look at the interest rates and know the best deal, the truth is far from simple.  Smart fire departments understand there is more than just rate and ask the questions to get the best deal.

Stay safe!
John R. Hill
President
First Bankers

Wednesday, August 19, 2015

Fire Truck Lease Purchase - Terms and conditions

How do you know what is normal when financing a fire truck?

Would you agree to paying every penny of interest - even if you pay off the truck early?  Or, agree to a fee every time you want to check your balance or get your lien released when you pay off your truck?  Or, your truck is repossessed if you are one day late.

Most people would view those terms as over the top and wouldn't agree to them.  But departments agree to these and other outrageous terms every day.

So, what are typical terms and conditions? 

  1. First, since most fire trucks are financed with tax-exempt leases, you should expect to see language that requires you to not violate any tax laws.  Generally, that means you use the fire truck for public purposes only.
  2. You should expect to see language that requires you to maintain liability and damage insurance.  The truck should be repaired in case of any accident and your department and the bank are covered by anyone suing you over any damages you caused with the truck.
  3. You should expect to see repayment terms.  Things like:  how many payments, how much is the payment, what is the rules if you want to pay off early, what happens after you pay all your payments, what is the grace period,etc.
  4. Finally, what happens if you fail to live up to the terms of the lease purchase agreement?  What is the process before extreme actions are taken to collect the money?

Summary

In most cases, the terms and conditions should follow common sense.  In other words, you would expect someone to follow the same rules if you were lending them money.  If the terms you see in your fire truck lease purchase contract seem a little extreme, you may want to talk to someone else.

Stay safe!
John R. Hill
President
First Bankers

Wednesday, August 12, 2015

Fire Truck Lease Purchase - How many years?

How many years can you finance a fire truck with a lease purchase agreement?

Typically, most fire trucks are financed from 3 to 15 years.  However, many government loan programs will finance a truck for 20, 25, or even 30 years but funds for those programs are limited.

What is the right financing term for our fire truck?

There are advantages and  disadvantages for all financing terms and it's important to know what will fit your situation the best.

  • Short term (3-5 years):  The main benefit for this option is the lowest borrowing cost.  You will also build equity faster and be able to prepare for the next truck purchase.  However, the payments are higher and may not fit in your payment budget.
  • Traditional term (6-10 years):  Most fire trucks are financed with this option.  It provides a balance between payment amount and overall cost.  It also pays off the truck consistent with its useful life.  That means you still won't owe money on a truck you need to replace.
  • Longer term (11-15 years):  This option works best for departments who are concerned about having the lowest payment.  However, this option significantly increase your borrowing costs and will not build equity very quickly.  And, if used incorrectly, your department can still owe money on a truck that needs costly repairs or replacement.

Summary

No financing term is right for everyone.  By understanding your options and the pros and cons with each option, you can select the right term for you.

If you'd like more information, got to FirstBankers.net and download the Fire Truck Financing Kit.

Stay safe!
John R. Hill
President
First Bankers