HEADLINES
No Money for New School Bus Purchases? Consider Financing
Need to purchase school buses but bud-
gets are making the expenditures difficult to stomach? Have you considered financing options? Tat is the number-one question to ask, according to representatives from large school bus financial organizations. As districts nationwide head into the
new school year, dwindling budgets have made school bus replacements a slippery slope, especially as new vehicle costs rise about 3 percent each year. But options abound, regardless if you hail from a large urban school district with plenty of pur- chasing power or a small rural district. No matter if the district owns and oper-
ates the fleet or contracts out, the name of the game is spreading the cost of new pur- chases over longer periods of time to reduce the need for a greater up-front investment and to increase payment flexibility. “Commercial, municipal and federal cus-
tomers are all facing similar challenges as they work with limited resources, reduced funding and greater transportation needs,” says Kenneth P. Kaminsky Jr., global busi-
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ally only 5 percent of the company’s sales were financed. Tis year, he is projecting that number to be closer to 20 percent. He added that customers need to under- stand full school bus life-cycle costs and how financing can reduce maintenance expenses and soften the burden of annual price increases. “Interest rates are so low, they’re actu-
ally saving money [through financing],” Courtney said. For large bus purchases, the industry
currently has three “captive” financing providers to choose from: Blue Bird Capi- tal Services; Daimler Financial Services; and Navistar Capital, a GE Capital pro- gram formed in May 2010 as the “preferred source” of retail loan and lease financing for IC Bus vehicles and equipment. Tese captives work exclusively for
their respective manufacturers and offer a variety of municipal financing packages to dealers for public school district or state government customers as well as com- mercial packages for private companies.
dent transporters run the gamut. Tere are non-appropriation clauses that permit long-term financing without technically incurring debt, such as equipment lease purchase agreements that operate under general obligation bonds. Te lessee ac- quires ownership at the expiration of the lease, and debt is secured by a pledge of the municipality’s full faith, credit and taxing powers. Lease revenue bond obligations are tied to a multi-party agreement struc- tured under local or state statutes. Tese are generally structured through conduits or special purpose vehicles. Delinquent tax notes are secured by outstanding and on- going delinquent taxes and are not subject to annual appropriations. Meanwhile, installment sale agreements
pledge revenue toward the repayment of leases secured by a particular revenue source. Lease revenue obligations usually do not contain non-appropriation clauses. Most can be managed individually as multi- year financing with terms of 10 years or short-term bridge loans.
To ignore financing is ignoring a great potential to save money. You
don’t have to do it, but you should always ask about it as an option. ❞ — Keith Courtney, Daimler Financial
ness manager for De Lage Landen Financial Services and program manager for Blue Bird Capital Services. “As the purchasing cycle comes full circle, the market is positioned to face expanding equipment needs with shrinking budgets. Te ability to raise cash for those purchases has become increasingly more challenging. Tis creates quite the co- nundrum for the transportation buyer.” Keith Courtney, sales manager for Daimler Financial, said that tradition-
Ten there is federal financing for govern- ment fleets and the armed services. “Municipal customers are not eligible for
our traditional retail loan and lease products but may be eligible for tax-exempt financ- ing,” said Larry Sellars, inside sales manager for Navistar Capital. “Private bus contractors are not eligible for tax-exempt financing but may be eligible for our full complement of retail loan and lease products.” Te additional options available to stu-
20 School Transportation News Magazine August 2011 Financing allows customers to be more
creative in managing budgets by potentially including parts and service for transporta- tion assets into the overall cost. Each of the three OEM financing companies offer slight- ly different packages, so it’s important for customers to ask questions. “To ignore financing is ignoring a great
potential to save money,” said Courtney. “You don’t have to do it, but you should always ask about it as an option.” ■
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