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News


going to happen,” he said. “I suspect sooner than later, but we’re certainly at a bottom and the trend is higher, although at a very slow pace for the time being.” Berg explained that many districts have traditionally paid cash to buy buses because “that’s the way they’ve always done it and they keep going down that road.” He said that the time and effort lenders have spent in recent years to encourage leasing is “beginning to pay dividends for customers,” particularly in New England, where an increasing number of districts are in their second and third leasing cycles. “Other parts of the country are start- ing to get the feel for it, too,” Berg said. “Districts are looking to put their money in the classroom. Tey’re not in business to transport kids.” While the Federal Reserve intends to soon raise interest rates, Berg doesn’t expect anyone to be caught off-guard. “Te Fed has signaled that message. Everybody’s preparing for it,” he said.


One potential monkey wrench is a tendency for inflation to remain low during presidential election years and then rise in outlying years, Berg added. “If you came to me now and said you wanted to look at a floating (interest) rate, I’d say, ‘Why? Why not lock in the best rate you can lock in?’ If we were at the tail end of the other cycle, where rates were up, that’s when you book floating rates,” he said. He noted most districts around the coun-


try are still looking to cut costs, prompting a move to financing. “When rates are in the 2-percent range,


that’s pretty low, and capital outlay for a district writing a check might be better spent elsewhere,” Berg said. In addition to lease-to-own and walk- away lease agreements, districts and con- tractors could benefit from other financing approaches.


Coolbaugh added that available options include straight financing, a balloon pay- ment or a lease residual, when the vehicle


can be purchased at the end of the contract. “Sophisticated clients have an equipment


repurchase system already in place so every year they’re replacing a percentage of their fleet so they’re never out 10 years,” he said. “Te best approach is to sit down with your lender and accountant and come up with a fleet purchasing plan.” Commercial carriers and districts have an


average age of equipment they’re allowed to run, whether it is through local standards or state law. “Tere is a tipping point where a school bus is paid for but maintenance costs increase and that’s when customers want to run newer equipment,” Berg said. Berg’s employer, a privately-owned corporation dedicated to serving fire and emergency, commercial and recreation specialty vehicle markets worldwide, is also seeing more demand for walk-away leases from districts that have determined they will only need a specific number of newer buses for three or five years.


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1.800.543.0575 | www.ewss.org | 10939B Reed Hartman Hwy. • Cincinnati, OH 45242 22 School Transportation News • JUNE 2016


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