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FINANCE ISSUES The Financial Picture Before you rush out to see a dealer, coachbuilder, or local lender with your cash burning a hole in your pocket, there is a much to consider when it comes to setting up financing arrangements for your new purchase. Know the steps that affect whether you will get an attractive interest rate.
Prepare to Meet Your Lender "Be prepared to provide information in the form of bank statements, tax returns, financial statements, and above all, be truthful," says Barry Korn, president of Barrett Capital Group in New Rochelle, N.Y. "The nature of the industry is that operators what to be able to get an expensive vehicle but they're not able to show the resources."
Maintain Your Bank Balances If you're running a business, you need to have adequate cash (reserves) in your business accounts to support your business. "An operator should be able to maintain a medium four-figure balance in his or her business account," says Larry Kole, president of Autoline Services in Croton-on-Hudson, N.Y. "If somebody's looking to borrow $60,000 or $70,000, a lender is not going to give them that kind of loan when there isn't enough in the checking account to cover the first payment."
Limit Credit Cards For example, if you carry five credit cards, each with a $10,000 limit, and your balances are very low, the fact that you have the availability of $50,000 is still going to have an impact on your credit and the lender's decision. "Limit the amount of credit cards you have," Kole says. The average person carries four or five credit cards. If you're leveraged on all your credit card debt with high interest rates, that is clearly an area of concern to lenders.
Your Credit Report Counts More and more leasing companies and lenders are relying on credit scores. "Some lenders are moving entirely to credit scores so that if you do not have the appropriate credit score (minimum credit score), you are an automatic turndown," Korn says.
At Barrett Capital, credit scores are looked at, but used as guidance. "When one serves the sub-prime market, the market of weaker credit, you have to be able to understand what's behind the report and what's behind the numbers. But in terms of the operator, tier pricing is becoming an increasing tool for vendors to be able to distinguish between the better credits and the weaker credits." And this will help determine the type of interest rate you will be offered.
Also, understand the connection between your personal credit and your business credit. "On occasion, you have people whose personal credit is poor, but their company's credit is clean, and they don't understand why they're being penalized," Korn says. The reason is, if the business is doing so well, then there shouldn't be a problem why you, as the owner of that business, cannot satisfy all of your personal bills in a timely manner." Generally speaking, one would think that personal bills are taken care of before business obligations. "So it becomes a disconnect if a lender sees that someone has poor consumer credit," he says. "A lot of decisions are made based upon the fact that their personal credit is weaker than their business credit, and that can affect pricing on their business credit."
Leasing Mistakes Borrowers need to know whether the lease is a direct lease or a brokered lease. A brokered lease, meaning the lease is actually put together by a broker acting as a leasing company, always involves a fee.
"The mistake an operator can make is in not spending the time they need to do a little research, comparing company to company," says Jim Smith, leasing manager with Brenner Leasing in Harrisburg, Pa. "It's a matter of gathering information so that you can make an informed decision."
For those with good credit, it's relatively easy. "They can go almost anywhere," Smith says. "People who are new, or who are not as well established, are going to have a more difficult time of getting the financing, and likely, because of the lack of experience, will probably pay a little higher rate on that lease, until they become established." Smith advises anybody looking for financing to make a few calls. "A lot of people are really good about giving information out, so what it really comes down to is that you should be able to make an informed decision."
INSURANCE Factoring in Insurance When purchasing a vehicle, operators need to consider not only the total purchase price of the vehicle, but also how much the particular limousine will cost them. To get this amount, operators need to factor in the cost of insuring the vehicle.
One way that operators can do this is to consult their insurance agents before they actually sign a contract and purchase a vehicle.
"When you enter into a purchase of a new vehicle, you'll need some idea of what that new vehicle is going to cost you," said Ray Gooley of HRH Insurance. "Use your insurance person as a resource and as part of your management team."
Many business decisions are made after consulting an accountant or lawyer. Your insurance agent should be consulted prior to any vehicle purchases.
"If you contact them after you have the signed purchase contract in hand, they may insure you to get it off the lot, but they will send you a non-renewal notice," Gooley adds. "Now you're in a situation where you have to find a new insurance carrier."
Make Sure it's Covered An insurance agent has a legal obligation to inform you what is needed to properly insure your vehicle. It is then up to you to decide what you can and can't afford. Also, it is important to check with an insurance agent prior to purchase of the vehicle to make sure that the particular carrier will insure it. There are an increasing number of companies that are not going to insure a vehicle that is not QVM or CMC certified.
"If it is not supported by the manufacturer (meaning QVM or CMC) we won't do it," says Mark Mucere, of London American Livery. "If it's supported by the manufacturer then more than likely we will cover it. It's just a better risk for us."
Mucere explains that operators need to ask what can be covered. "They need to contact their agent and say, 'I'm looking at getting this. Can you make sure that I can get covered and that I will be covered when I drive it off the lot,'" he says.
Shopping for a Carrier If you're purchasing a vehicle that your current carrier is not able to insure, then you will be forced to find one who is able. There are a number of ways in which you can do this. One is consult a resource, like the LCT Fact Book, and call the various carriers to see what types of vehicles they cover. This will allow you to check the carriers you want and ask specific questions (see sidebar on page 38) to find out about them.
Another option is to contact an agent who writes for multiple carriers. They can look into what their carriers will cover. It is less time consuming, but it may limit you on what carriers are checked.
"Make sure with a carrier that has a strong financial rating," Mucere advises. "You can go to AM Best and find out what the ratings mean. Also check the longevity of the insurance company's program in the industry, and you should work with a retailer that understands your business needs - a broker who is savvy with limousines."
Don't Shop On Price Alone Operators should be cautioned not to shop for insurance solely based on price. There are a lot of other factors that need to be considered, from limits and type of coverage to financial strength of the company. If it sounds too good, it's probably not a good deal.
"Price is not everything," Gooley says. "So many insurance companies are having difficulties right now. After you receive a quotation, your next questions would be, what is the financial rating of this particular company? You could be dealing with a B- company with one foot in the grave."
Gooley adds that operators should think about pricing insurance companies just like their clients price them. "It's just like if someone calls a limousine operator and they get quoted the normal price of $100 to the airport," he says. "Then they call up another operator who charges $35. There's got to be a reason why. And that cheaper isn't always better."
Also, Mucere suggests that operators should do a little shopping and know what you are looking for. "Don't get one quote for one guy," he says. "Look for coverage price and carrier. Operators need to get educated on insurance and know what it is that they are buying. They shouldn't just get it because they have to have it."
COACHBUILDERS Checking Out Coachbuilders Once you have an idea of what type of vehicle you want and know what you can afford, it's time to look at the coachbuilders. This is a crucial part of the buying process. As with anything you buy, you want to shop around for the right product. With a limousine you need to make sure that it is a good fit for what you need in your business.
Take the time to research the coachbuilders. It's important to know who is making the vehicle that your chauffeurs and clients are going to be riding in. Operators need to find out as much as they can about the builder and the product it makes before making a purchase. Find out what models they have and ask them for vehicle specifications. Ask the builder if its vehicles meet federal safety standards and request to see documentation supporting that. If they are a QVM or CMC certified builder, ask to see their current certification.
What's in a Name? Operators should find out what kind of a reputation a coachbuilder has in the industry. How long have they been producing vehicles? If possible, take a tour of the builder's manufacturing facility.
"It's all representative of how the company does business," says John Beck, executive vice president of Krystal Enterprises." It doesn't have to look incredible, but it needs to look like a serious operation with organization."
Check With Other Operators A good way to find out about a coachbuilder and its product is to talk with operators who are currently using the product.
"Speak with operators and drivers that have these vehicles and ask them what they're finding in terms of service records and reliability," advises Ken Boyar, president of LCW Automotive Corp. "That's why we encourage operators to come to the show, so that they can talk with other operators about the vehicles. Years ago, before the LCT Show, it was very difficult to get the word out to operators. We had to chase people down on the street."
Aside from talking with operators at the show, ask the coachbuilder for a list of operators who are currently using their product.
Beck advises that you ask for a list of 25 operators that are operating a coachbuilder's vehicles. "From there, I'd pick about five to call," he says. "Plus if he can show you 25 people that are happy, chances are that he's alright."
Look Beyond Price In the current economic condition, many operators focus their attention on price. However, with purchasing a vehicle, sometimes it's not all about price.
"People get hung up on the price and forget to look and see what exactly is in the car," says Dan Mitchell, president of DaBryan Coach Builders. "They just compare prices and not the vehicles. They need to look at the entire price value equation."
Mitchell explains the price value equation as everything that a vehicle offers (amenities, warranty packages, etc.) for the price that it is marked. "You have to determine what fits your needs and what works for you," he adds.
Warranties Be sure to check the warranty packages of the coachbuilders. Vehicles from the QVM and CMC certified builders receive extended warranties from the manufacturers.
"GM and Ford have tested the components of their vehicles to withstand the rigors of the livery industry when properly used," Boyar explains. "They offer their $150 thousand warranties to support them."
Boyar cautions operators to really check the warranties offered by builders who are not certified by Ford or Cadillac. "They are without OEM factory warranties and the history with the non-OEM warranty program is deplorable," he says. "I'm not saying that non certified builders haven't paid for extended warranties, but rather the history of the non OEM warranties is a very bad one."
Just Do Your Homework When checking out coachbuilders, be sure to do your research before you buy. Really look into the service track record of the individual company that you are buying from and know what type of vehicle and what kind of reputation they have in the industry. Then, when you determine what fits your needs, tad have done you're research, you will be able to be confident with your decision.
How the LCT Show Can Help You Make the time and investment of attending the LCT Show pay off by taking full advantage of all that you can. This is a chance to meet one-on-one with coachbuilders, dealers and lenders, who will give you a clear picture of what's available to you.
Start by preparing a list of exhibitors who you want to target based on your current and future business needs. This is a chance to see a wide variety of displays, view presentations, take test drives and attend educational seminars.
Focus on your needs and make a plan. Instead of being overwhelmed in the huge exhibit hall and feeling pulled in different directions at once, immediately plan an itinerary or basic agenda for your attendance. Prioritize the things you're there to see, and if there is any time leftover, you can fit in extras. This will help you get the most out of the trade show and ultimately maximize your business results.
Schedule workshops and presentations prior to the show, if possible. If you're traveling with an associate, plan to split up so you can cover as many presentations and seminars as possible. Set up a time to meet afterward with your colleagues and compare notes. Many times presentations and seminars are taped and available for purchase later. Purchasing tapes of vital presentations will allow you to review the information at your leisure.
Allow time for social appointments and attending social functions. Networking and exchanging business cards in a casual atmosphere is a byproduct of trade shows. Always keep in mind that even a direct competitor can be a source of important information in the future.
When the trade show is over and you've returned to your daily business routine, follow up on all the business contacts you made at the show. These contacts can help you to build future business relationships with coachbuilders, sales representatives, distributors, media and other participants in your marketplace, which translates into increased business for you.
Dealing with Dealers When you're ready to make a purchase, working with a dealer has many advantages.
"When you have a reputable dealer, someone who's been handling the product for a period of time and has a good relationship with the manufacturer, you have someone fighting to get your car or problem corrected," says Pete Corelli, president of Lakeview Custom Coach in Oaklyn, N.J. , and Krystal Enterprises dealer. "Meaning, the end user is a customer of the manufacturer and a customer of mine. I'm also a customer of the manufacturer. So Krystal has two people they have to satisfy."
As a dealer, Corelli purchases over 100 vehicles a year from Krystal and services many more than that. "They look at me as a customer who buys a lot of cars," he says. "Suppose there's a marginal situation, such as if the manufacturer were to say, 'This isn't under warranty,' and legitimately that's correct. I can call Krystal and say, 'This guy's a good customer.' I lobby for the customer, because I want the customer to be satisfied."
The immediate need to have a repair done is not lost on dealers.
"If a customer experiences any problems, we pull them in right away," says Barry Traub, owner of Universal Limousine Distributors in Wayne, N.J. "It's understood that our customers need to make money with their vehicles, and the downtime costs them money." Finally, Research and Network Assess your needs, do the research and, most important, network with other operators and your local association to stay on top of legislation in your particular area. Comparing notes with your colleagues can help you stay on top of the latest rules and glean ideas on how to make your bus
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