Wednesday, July 17, 2013

Fire Truck Financing - walk away or turn in leases

Fire trucks are financed in 1 of 3 ways - Lease Purchase, a lease (walk-away or turn-in), or a bond.  We'll look at the differences of each method in the next few weeks.

Over the past decade, fire truck manufacturers offered a "true" fire truck lease.  Often called walk-away or turn-in leases.

So, what are turn-in or walk-away fire truck leases?

These leases are very similar to the auto leases you see advertised.

These leases allow the fire department to use the truck for a set amount of years in exchange for payments. The department is not establishing any ownership in the truck.  The department can purchase the truck at the end of the lease term for the market value of the truck.

These type of agreements have not been legally scrutinized to ensure they qualify for low, tax-exempt interest rates.

What happens at the end?

It depends on the type of agreement the department signs.

For a turn-in lease, you have already agreed to buy the replacement truck from the same manufacturer.  So, you "turn-in" the old truck and buy a new truck.

For a walk-away lease, the department can "walk-away" and buy a new truck from anyone else.

In both types of agreements, the fire department is responsible for excessive wear and tear and may have to pay additional amounts to repair the truck back to its expected condition.

Summary

While newer, these type of agreements work well for departments who have the financial and operational discipline to abide by the terms of the contracts.  It works well for departments who want to commit to a certain manufacturer for the future.

Stay safe!
John R. Hill
President
First Bankers

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