"Tell me about your lease program" are chilling words to a coach seller at the outset of a conversation.

Generally, it means the buyer has little money and a minimal grasp of the business.

What he's really saying is "can you sell me a bus without my having to invest any money?"

For years the motorcoach business in North America operated on a unique business model. Many companies got by on the narrowest of margins, and made money when they sold, or traded, their used coaches at very high prices. That worked well as long as used equipment held its value.

In ye olden days, your bus payment was almost an investment. Youd get most of it back when you parted with the coach. So, if you broke even in operations, you were golden. Even with 10-year financing, you had equity in the bus almost at the outset.

Since this was a major source of "profit," it came as a shock when coach values began to fall rapidly. Companies counted on equity that had evaporated. The reasons are many, but we live in a different world today.

In a competitive atmosphere, operators need ways to make cash flow work in an environment where residual values are less predictable. Responding to this new environment, manufacturers and financing institutions offer several ways to pay for coaches.

These financing options are tools, like a hammer, and like a hammer they can be used to build -- or destroy. It's all in the application.

Let's begin with the obvious: What the heck are you doing reading an article about bus financing written by a guy who, a month ago, was telling you how to sweep out your buses?

What you really need is an accountant who understands transportation. This column will merely attempt to give you an idea of whats out there, how it works, and some possible consequences.

For years, most buses were financed in the same manner you'd buy a car. You put a percentage down, and make monthly payments for a fixed period, and own the vehicle. You keep the tax benefits (useful if you're profitable, wasted if not) and it's easy to know where you are in terms of equity.

Operators sometimes stretched the term as far as possible, to lower payments. That works OK in stable times, but can be ugly if you have to sell the coach early in a drooping market.

Another option is an Operating Lease. Like renting an apartment, you pay for the use, and own nothing when you move on. The difference between a bus and the apartment is that the bus has lost value during the rental, so payments are pegged, in part, to what the leasing company thinks the bus will be worth at the end of the lease.

With values fluctuating, you will be charged based on his "worst case" assumption. The leasing outfit gets to keep some tax benefits, and passes them on in form of lower payments.

Your initial cash outlay would be one or two months payment and a damage deposit. You're responsible for returning the coach in a predetermined condition, and within mileage parameters. Be clear on specifics before taking delivery.

TRAC Leases have become popular as a way of keeping payments (and initial outlay) low, while avoiding some of the pitfalls of an Operating Lease.

This is a different kind of hammer. It has some traits of a lease, and some of regular finance, and it can be a great tool ... or it can beat you senseless.

They use two mechanisms to lower monthly payments. First, the leasing company keeps the tax benefits, so it can offer a lower interest rate. Second, since the operator is obligated to purchase the coach at a fixed price, the leasing company can reward the operator with lower payments because it knows precisely what the residual value will be.

When TRACs first appeared, many operators, in an effort to limit monthly outlay, elected large balloons, based on the assumption coach values would hold steady.

Values dipped, however, and some found themselves owing far more than the bus was worth. This was double ugly because no one would re-finance the bus for what was owed.

Since the lender had used the tax benefits, getting out of the coach early was complex and unpredictable. Financial woes (or a totaled bus) opened a can of tax worms.

Conversely, operators who set the balloon low enough were able to buy the bus for less than market value, and either continue to operate it, or sell at a profit.

Boiled down, you need a savvy accountant to help you weigh the various methods of obtaining coaches, in terms of the economic and tax status of your business. There is no simple solution that fits everyone.

Low payments are seductive, but look at the whole picture. "Pay me now or pay me later" almost always applies.

Do NOT trust a bus sweeper on this stuff -- get qualified help.

Dave Millhouser is an account representative for ABC Companies. Contact him at: dmillhouser@abc-companies.com.