Filed under: Finance, IC, Iowa, Leasing, Minnesota, School Transportation News Magazine
Clearing up the myths and misconceptions behind leasing a school bus.
By Stephane Babcock, School Transportation News Magazine, April 2009
Schools are tightening their belts. And some are trying so hard that schools buses are getting squeezed out of budgets completely. Now, more than ever, districts need to research new options to fill the constant demands of school transportation.
Taking the Fear out of Leasing
With the economy putting a stranglehold on personal, business and educational budgets, everyone is looking for new options to stretch their dollars to cover all of life’s necessities. For school districts, that may mean re-educating themselves on what the term “leasing” really means.
“In today’s world, people are sometimes fearful of what the word lease means of they’ve had a bad personal experience with it. That’s why I can it an installment purchase,” said Ken Kaminsky, president and COO of Traxis Financial Group, the financial services arm that works closely with Blue Bird and its customers.
Even when the country’s economy in dire straits, the not-too-distant future is much brighter in many people’s minds. Leasing, according to Kaminsky, gives school districts the ability to purchase the buses they need now and stretch the payments over a period of time that is more manageable. For example, when people purchase a home, they usually have a mortgage. At the end of the mortgage’s term, they own the home. In this same way, people can acquire and procure a school bus. Essentially, they are making payments over a period of time and then own the school bus at the end of that period.
“People can optimize and maximize their working capital and their budgets by using financing to get the buses that they need to meet the requirements of their different communities,” added Kaminsky.
Some districts are already taking advantage of leasing’s advantages. Gary Walk, fleet manager for Aurora, Colo., Public Schools, first looked into the leasing option to purchase the buses he needed to immediately replace older vehicles he was forced to retire.
“There are financial companies out there that would like your business, so you do have a choice getting the very best proposal,” said Walk. “In the long run, you will be paying more for the leased buses. But remember, you have them to use right away.”
After purchasing a 56-passenger special needs bus, one multi-function bus, support fleet vehicles and some related equipment outright, his department’s budget was almost gone. With the money he had left, Walk entered into a lease/purchase agreement for four, 77-passenger school buses and one 16-passenger bus with a wheelchair lift.
Keeping it in the Family
For the three large bus manufacturers, financing and leasing options are just a phone call away. Blue Bird, IC Bus and Thomas Built Buses, as members of much larger conglomerates, have financial services partners in the form of Traxis Financial Group, Navistar Financial, and Daimler Financial, respectively. This close relationship is available to help customers in the end, as the interconnected groups understand the distinct nature of the school bus market.
“Our direct association with IC Bus allows us to stay close to the market needs, helping keep our rates and programs competitive, ultimately offering our customers the best finance options in their bus purchase,” said Craig Medvec, bus marketing manager of Navistar Financial.
With the nuances associated with school buses, whether it be the differing laws and requirements between states of the industry-specific federal laws, some would have a hard time speaking intelligently with customers, according to Kaminsky.
“Traxis’ ability to focus solely in the transportation marketplace allows it to be aware and educated to those very specific details.”
The connections beyond the school bus market can also benefit the OEMs and, in the end, the customer.
“A major advantage is that Thomas and Daimler Financial are both part of Daimler AG, a global and diversified company that also includes the Mercedes-Benz and Freightliner brands,” said Keith Courtney, Daimler Financial’s sales manager for municipal and bus finance, adding that he believes this will help the company to weather the current economic storm.
Options and Benefits
Once districts get past any initial phobias, they can begin to learn more about the options available to them in terms of leasing a school bus. They key, according to Baystone Financial Group Vice President Blake Kaus, is finding a company that understands the business and is willing to work with the customer in order to provide them with the best option available.
“What may initially appear to be the best option may not actually be the best once all the final details and costs are considered. It will simply be important that a customer understands the variables involved when comparing leasing options and selects the best one for them,” added Kaus.
Although the commercial transportation leasing and financial market has been severely impacted by the current recession, there are bright spots.
“For customers with good credit, interest rates are at historical lows, and manufacturers are making deals to move inventory,” said Edward P. Kaye, president of Advantage Funding. “A sound and experienced finance or leasing company should be able to tailor a finance program to the district’s needs.”
These programs can offer options that range from one-year to 10-year leases, with monthly, quarterly, semi-annual or annual payment options. Navistar Financial offers tax-exempt leasing to school districts which can help them balance budget constraints with the need for new school bus purchases.
“Through municipal leasing, school districts can make their budgets work harder for them, allowing them to spend the same amount while increasing the number of old buses replaced with new, more efficient vehicles,” said Medvec.
School districts must also consider the fact that prices will likely increase with the 2010 emissions requirements.
“Purchasing and additional bus or two and financing them…is less expensive than it will be with next year’s anticipated price increases,” said Daimler Financial’s Courtney.
In the end, educating school districts on the options is the first and most important step to this financial equation.
“I think it’s incumbent upon us to make sure people know they have options at their disposal and that they just need to make an informed and educated business decision that will make sense for them and help them optimize their existing budgets,” added Traxis’ Kaminsky.
** If you have any questions about leasing, please contact our sales manager Jason Anderson at salesmanager@hoglundbus.com or 763-295-2955. **
