By John R. Hill
Envizion Financial Apparatus Budgeting Consultant
I recently helped a Pennsylvania fire department budget for their new truck. They were a fairly rural community that had about 120 fire calls per year. They did not run EMS calls.
They were attempting to buy a new rescue pumper which cost about $483,000. Big six-man custom cab, foam, big pump, lots of cabinets. I helped them analyze their financial budget and determined that they could afford (barely) the truck with a 15-year financing plan.
I ran a new, different analysis for them and they were stunned with the results. I call it the truck cost per run ratio.
The department was going to buy a $483,000 truck and, over 15 years, pay $241,500 in interest for a total truck cost of $724,500.
As I mentioned, the department ran about 120 calls per year and, this would be the new first out truck, so the truck would run about 2,400 calls over a 20-year span.
Dividing the total truck cost of $724,500 by the 2,400 runs, the truck cost per run ratio is $301 per run.
When I showed this ratio to the department, they were shocked to learn how much this truck would cost them.
The department quickly determined just how much income they would have to raise just to cover the $300 per call!
And that is only to pay for the truck. That per run amount does not include the costs of insuring it, repairing it, fueling it, or any other expense the department will incur in operating the truck.
This is a department who relies heavily upon fundraising for its income and each dollar is hard-earned.
And, in continuing a recent trend I’ve seen, the department went back to the drawing board and selected a truck that was smaller, was a better match for their use (they rarely had more than two firefighters in the cab), and only cost $280,000. It fit the use better and its truck cost per run ratio was only $157.
It gets easy to lose sight of some basic math when the sales person drives a big shiny new demo fire truck into the driveway. But common sense, especially in these economic times, requires a complete analysis to determine the most efficient approach.
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John R. Hill is an apparatus budgeting consultant for Envizion Financial, which helps fire departments avoid common financial mistakes that are made in the apparatus purchasing process. John also writes a weekly Web site column on FireFinanceGuy.com. To contact John, e-mail jrhill@envizionfire.com.