It seemed like the wisdom of the ages when Grandpa would say, "Buy the best tools you can find, boy. Not the best you can afford - the best you can buy." His advice has been echoed by many shop owners and supervisors as newcomers try to fill a tool chest.

Newcomers always can use advice on purchasing and keeping new tools. That advice ranges from buying the equipment to keeping it secure and insuring it in case of loss or theft.

A mechanic who worked on buses and trolley cars in Philadelphia, Grandpa passed on a lot of good advice about tools. But he never seemed to get around to explaining how to pay for those tools and still have a few cents left over to buy lunch. Most tool manufacturers and their distributors realize that getting outfitted is a costly proposition. They all have programs to help mechanics stock a tool chest.

Snap-on Inc. in Kenosha, Wis., recently announced it will combine the operations of its Snap-on Credit operations with those of Newcourt Credit Group in Toronto, Canada. Under the agreement signed in November, Snap-on Credit will combine the operations and commitments of its existing finance program with Newcourt's expertise. Staffed mainly with Snap-on personnel, the new business, to be called Snap-on Credit LLC, will get underway early in 1999 and expand globally later.

Credit Options
Credit options abound. The first step in making a good credit purchasing decision is to be sure you know who is actually selling you the use of their money. For big purchases, many tool companies offer an extended credit program. It is similar to a bank loan, but usually is easier to obtain - both as far as reduced paperwork and without incurring time off work - since the tool company has an interest in selling tools right away. A convenient credit program is a major marketing help for those companies. Those loans generally are spread over a long period of time, such as months or years.

Many of the tool dealers who come by in their trucks also offer revolving accounts. This type of account uses the dealer's money, usually at no interest to the mechanic. The timeframe of the loan typically is short - "until payday" is a typical arrangement, although they may offer to spread out payments over several weeks or months. Payback on a typical purchase of a $125 wrench set may be extended over five weeks at $25 a week. Should money get tight, the dealer may be willing to accept non-cash payment for the loan. Stories abound of dealers who, in effect, traded tune-ups on their family cars, reconditioned motorcycles and other bartered goods for payment on tools. The average small-town bank is not so flexible.

Tool Company Plans
MAC Tools in Columbus, Ohio, and Snap-on Tools are two major providers of tools to the auto trade. Both companies use franchised dealers who call on auto technicians and motor service shop owners at repair shops across the country.

Snap-on offers a program targeted specifically at new technicians. "Providing financing to our customers is an important link in our value chain," says Robert Cornog, CEO of Snap-on.

Under the program, any technician who is at least 18 years of age will be granted up to $3,500 in credit, even if they have no previous credit history.

While the interest charged varies from state to state, the program is positioned to be competitive with other options. For amounts more than $3,500, the young technician needs a co-signer. Still, if the $3,500 is wisely spent, it will put most newcomers in a good position to get to work in their first job. Once they have established a work and credit history, they can go to more traditional forms of credit.

MAC Tools offers the MAC Advantage program through its national network of tool distributors. It allows professional technicians to finance tool purchases without using their personal credit cards or other sources of credit. In many cases, the individual tech may not have been in the business long enough to get the financial experience or to build a credit record. But daily assignments still will demand the purchase of new tools to keep up with the demands of the job.

"We feel it is important to get the new technician coming into the business started right, so we started the program," says Rick Secor, Snap-on's manager of corporate communications.

Snap-on offers an extended credit account through Snap-on Credit Corporation. This allows shop owners or technicians to make larger purchases and to extend payments over long periods of time.

A typical credit application is completed at the time of the sale. The dealer will call in the report and, in most cases, the credit is granted on the spot. The amount of the loan and the terms will depend on the individual's credit history, just as it would with any other loan application.

"When you buy from us, you are buying the whole package of a weekly sales visit, service and assurance that you are up-to-date with the business," says Secor.

Leasing, which is an alternative to outright purchase of a tool, can be an attractive way for shop owners to obtain major equipment without dropping a lot of cash up front. Engine analyzers and wheel alignment systems are likely candidates for leasing. From tool dealers, leases work just like an auto lease: payment is made over two or three years and the shop has the option of buying the tool at the end of the lease or opting to replace it with a newer version.

MAC Tools says using a tool company credit program is particularly helpful to automotive technicians and service station owners who need to make sizable tool or systems purchases to stay competitive in today's automotive aftermarket. The company says it offers terms which are simple, flexible and competitive.

Using Credit Cards
Another option is to go to the local store and purchase tools on a credit card. While it provides immediate access to a complete set of tools and eliminates a lot of the hassles in the short run, this tends to be the most expensive option in the long run.

The Sears line of Craftsman tools is perhaps the store brand most often found in tool boxes. The tools are good quality and known for their no-questions return policy. They'd better last a long time. Currently, Sears charges 21 percent interest on balances carried on its credit card in Ohio (rates vary from state to state).

Some of the individual route drivers for tool companies also accept common charge cards, but that is up to the driver and not part of the corporate program.

Many other good lines of tools are marketed by the manufacturer through distributors and into local shops. Those stores usually accept consumer credit cards such as MasterCard or Visa. Interest rates on these credit card purchases vary from around 10 percent to 21 percent, depending on which bank issues the charge card and the state where it is issued.

It certainly pays to shop around for lower-interest credit cards if the card is going to carry a balance for some time. The mechanic whose card charges 20 percent interest and who makes a minimum payment on the credit balance each month will take a long time to pay off the bill. At a 20 percent interest rate, it will take 12 years to pay off the debt on a $1,000 tool purchase made today.

Credit card purchases are not all bad, if handled correctly. A good rule of thumb is to keep credit card balances under 5 percent to 10 percent of income. One way to stay out of trouble is to write down every credit purchase and keep a running tally of how much is owed. When the amount owed exceeds the borrower's ability to pay off the debt within six to eight weeks, it is time to quit using all credit cards until the debt is paid down.

Beware of credit offers that penalize the borrower who makes early payment of the debt. Loans figured on the so-called Rule of 78 let the lender recognize the interest before it actually is due. The technician who gets a year-end bonus and decides to pay off the loan will discover the full amount of the interest for the full term of the loan is charged. There is no reduction in total interest charged, even though the loan is paid off early. Such loans actually are illegal for consumer credit in a number of states. Better for the borrower are loans figured with the Actuarial Method. It calculates the interest over the actual period the money is borrowed, not over the hypothetical life of the loan.

Borrowing to buy good tools usually is a sound financial decision. Remember Grandpa's advice: "Buy the best tools you can find." Today, Grandpa would add, "And buy them on the most favorable terms you can negotiate."

Nothing kills a day's profits faster than opening up a shop and finding out that thieves have cleaned the place out. A good insurance policy can put the crew back to work fast, and at minimal loss. All astute shop owners carry business insurance. Many provide tool insurance as a benefit to their workers. Since a mechanic's tools are often his only source of income, some technicians carry a rider on their personal policies to cover tools. But those policies tend to be as much as four times more expensive and often less forgiving of loss. "Coverage is cheapest under a commercial contract," says Gerry Cecil, director of market development for the Automotive Specialty Markets Division of Universal Underwriters Insurance Co., Overland Park, Kan. Typical coverage from a commercial policy will be $15,000 to $20,000 per technician, with a range of $5,000 for newer workers to $30,000 for senior employees. The cost of a policy to cover tools is based on the valuation of the items covered. Although most policies provide a minimal amount of coverage, perhaps $500, the typical worker's tool chest is probably worth close to $15,000. Tool policies are written based on each $100 of valuation. A commercial policy has an advantage over a simple rider on a homeowners policy. Jim Cicero, assistant vice president of marketing for the manufacturing and distribution industry group at CNA, Chicago, Ill., says the benefit of having a specific policy is that it makes it easier to prove a loss when making a claim. "Usually, there is evidence of a break-in or theft," he says. "Having a specific policy makes it easier to prove the loss." While theft is the No. 1 cause of insurance claims, major fire damage from heat and water is a close second. A good business policy will also cover the loss of tools while a mechanic is on the roadside repairing a customer's car, for example. Companies will require a listing or "schedule" of all of the tools covered for each worker and their value. Cecil recommends insuring tools based on replacement cost. While recently purchased tools will be covered in most cases, it is a good idea to update the list of covered tools regularly. In any case, be sure to meet the 80 percent or 90 percent co-insurance minimum. Commercial insurance coverage is also available for breakdown of electronic equipment like diagnostic machinery. The premium will take care of the cost of repairs once the equipment is outside its manufacturer's guarantee period. Many of the most important tools in a service and repair facility are computerized, including alignment equipment, estimating equipment, invoicing and customer information equipment, and phone systems. It is important to have mechanical breakdown coverage on these items, in case an accidental mechanical failure results in a breakdown. It almost goes without saying that engine analyzers and other items that include computerized equipment must be properly covered. Universal is one of the largest customers of companies like Snap-on, purchasing millions of dollars in tools each year to replace stolen items. "We know losses occur. That's how we sell coverage," Cecil says. However, if a shop's loss history gets out of hand, insurers will presume that proper controls are not in place and the shop will find itself faced with a rate increase or policy cancellation. Should a mechanic experience a loss, the insurance company should make settlement of the claim within a week of the time proof of loss is presented, Cicero says.

Curt Harler is a freelance writer based in Strongsville, Ohio.

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