In today’s message:
- How your fleet becomes undervalued
- The “ask”
- Some humour
- Financing for equipment
How your fleet becomes undervalued
Back in January, we wrote about how the value of equipment showing on financial statements is often a lot lower than the real value. Several readers asked us how this works and how to fix it, so here is a quick summary.
Your accountant probably uses the Canada Revenue Agency (“CRA”) method to write off your equipment over time. On your financial statements it might be called “declining balance”. This method is required on your tax return, but is NOT required on your financials. The CRA method is to write off 40% of the previous year’s value, but only 20% in the first year of purchase.
If, however, we suppose that a new truck lasts 10 years, then a better and permitted method, the Aquilian method, is to write off 10% of the purchase price every year for 10 years. We show the results of each method in this chart:
So after 5 years, the CRA method creates an undervaluation of 79%!
This means your financial statements show your fleet has a value one fifth what it should be. Even if we use 7 years for the useful life of equipment instead of 10, the undervaluation is still 64%, or a fleet value about 1/3 what it should be.
No wonder that trucking companies have trouble getting bank loans: Their main assets are undervalued.
If your equipment is being undervalued by the CRA method, Aquilian can fix it for you and make your financials more attractive to your bank. You just have to ask us.
Will you let us finance your next new or used truck or trailer?
Here are a few good ones:
When Thompson hit seventy, he decided to change his lifestyle completely so that he could live longer. He went on a strict diet, he jogged, he swam, and he took sunbaths. In just three months’ time, Thompson lost thirty pounds, reduced his waist by six inches, and expanded his chest by five inches. Svelte and tan, he decided to top it all off with a sporty new haircut. Afterward, while stepping out of the barbershop, he was hit by a bus.
As he lay dying, he cried out, “God, how could you do this to me?”
And a voice from the heavens responded, “To tell you the truth, Thompson, I didn’t recognize you.”
A ninety-year-old man went to the doctor and said, “Doctor,my eighteen-year-old wife is expecting a baby.”
The doctor said, “Let me tell you a story. A man went hunting, but instead of a gun, he picked up an umbrella by mistake. When a bear suddenly charged at the man, he picked up the umbrella, shot the bear, and killed it.”
The man said, “Impossible. Someone else must have shot that bear.”
The doctor said, “My point exactly!”
An man walks into a bar, orders three pints of beer, and drinks them down, taking a sip from one, then a sip from the next, until they’re gone. He then orders three more. The bartender says, “You know, they’d be less likely to go flat if you bought them one at a time.”
The man says, “Yeah, I know, but I have two brothers, one in the States, one in Australia. When we all went our separate ways, we promised each other that we’d all drink this way in memory of the days when we drank together. Each of these is for one of my brothers and the third is for me.”
The bartender is touched, and says, “What a great custom!”
The becomes a regular in the bar and always orders the same way.
One day he comes in and orders only two pints, not three. The other regulars notice, and a silence falls over the bar.
When he comes to the bar for his second round, the bartender says, “Please accept my condolences, pal.”
The man says, “Oh, no, everyone’s fine. I just came from the doctor and he told me I had to quit drinking.”
Financing for equipment
We provide quick service and a low cost to acquire new and used income-producing units.
“Affordable monthly payment options”
Thanks for taking the time to read this, and have a great weekend.
Aquilian Financial provides loan, leasing, factoring, and employee health benefits solutions.
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or phone toll-free: 1.844.252.0524.
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