INDUSTRY CONNECTIONS: SPECIAL REPORT MORE FOR YOUR MONEY
AS ECONOMY CONTINUES RECOVERY, FINANCING EXPERTS SAY MANY SCHOOL DISTRICTS ARE STILL CHOOSING LEASE-TO-PURCHASE PLANS INSTEAD OF BUYING NEW BUSES AND EQUIPMENT OUTRIGHT
WRITTEN BY MICHELLE FISHER
agreement of choice is the five-year municipal lease purchase plan. “It’s a common term you and I have when we buy a car. Te
A
payment is attractive to the school district. If they need three buses, five years is typically the payment they can live with,” said Keith Courtney, national sales manager at Daimler Truck Financial (DTF). “If a school district has a budget of $100,000, that usually buys one school bus. Leasing allows them to purchase the number of units they truly need rather than what their budget allows them to afford.” Customers are keeping their school buses longer, he noted, be-
cause of budget shortfalls, but they don’t factor in the higher main- tenance and fuel costs. “We are definitely seeing aging fleets. When you put off purchases for so long, you can’t get by with getting two buses when you need 10,” he said. Courtney clarified that leasing is more like financing in the
school bus industry, because the financing company holds the lien, while the owner is either the school district or bus contractor. Te district has to be listed as owner on the title to get the tax-exempt rate, and they own the bus at the end of the term. DTF is the captive financing arm of Daimler Truck, which owns
Tomas Built Buses, while Blue Bird Capital Services (BBCS) is the “captive” for Blue Bird Corporation. Similarly, GE Capital han- dles leasing and financing for Navistar, the parent company of IC Bus. And often it is the school bus dealer who will direct customers to these in-house financing programs. “Lower interest rates and a lower initial cost of investment
continue to steer school districts toward lease purchases. Many Collins Bus distributors use multi-year balloon payment lease programs that allow districts to free up cash flow,” said Matt Scheuler, Collins' VP of sales and marketing. "Te net result is less money up front on bus purchases and increased flexibility within the district's working budget.”
44 School Transportation News June 2014
s transportation managers work to update aging fleets in a still-recovering economy, school bus leasing remains a popular option for operations of every size and ilk, according to key industry financing officials. And the
Ken Kaminsky, global business manager at BBCS, estimates that of the thousands of buses that Blue Bird manufactures annually, about 25 percent of them are acquired by the use of financing. “In the past year we’ve written close to 100 different financing contracts with 100 different customers. Te marketplace is ever changing,” he shared. “We’ve seen a lot of the larger retail banks come into the marketplace over the past four years, and that has created a tremen- dous amount of competition for school bus financing.” Kaminsky explained that these large retail banks see a great op-
portunity in financing municipal obligations “because the customer school districts most of the time are extremely credit-worthy, the asset has value in its essential use and the school bus is a great asset that retains significant value.” Since banks see this as a great opportunity, they have become a major player in the industry. But, a major differentiator between banks and school bus finance arms like BBCS is the banks will only go after the large, multimillion-dollar deals. School bus finance arms will do a one-bus deal valued at $80,000 in addition to the larger deals that the big banks pursue, he noted. Te same amount of work and follow-up with the customer go into both large and small deals. “BBCS will finance them all because we are a resource for Blue
Bird dealers and their customers as we provide financial solutions that meet the needs of all their customers, not just the big ones,” Kaminsky said.
FINDING THE BEST RESOURCE Both Kaminsky and Courtney emphasized that what the big
banks lack is the personalized customer service and product knowledge. “We’re there as a resource for customers, as a subject matter
expert to not only help in the sales process but also to educate the buyers, to work with the school districts at the different trade shows to bring awareness to the marketplace and to help come up with a customized solution that’s going to make the most sense for that specific opportunity. And I think that really differentiates us from our competition,” said Kaminsky.
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