Open End Lease (TRAC Leasing)
If you’re looking for a way to add vehicles to your fleet with greater flexibility, you may want to consider a Terminal Rental Adjustment Clause (TRAC) lease. Just one of the many financing solutions we offer, a TRAC lease can provide you with more freedom than other types of leases because it offers you some flexibility to choose your terms. The following information will help you understand the basics of this kind of leasing structure, and we will work closely with you to determine the type of arrangement that works best for your unique situation.
What Is a TRAC Lease?
Under standard terms, leasing equipment such as trucks, forklifts or trailers means making monthly payments set by the lessor. At the end of each contract, you have the option of paying the residual and owning the vehicle outright. Generally, higher monthly terms mean lower residuals and vice versa.
TRAC leases also give you a limited ability to negotiate the terms. The exact amount of flexibility you have depends on the lessor, but you may be able to secure lower monthly payments in exchange for a larger residual at the end. Another key difference is how the situation is handled if you choose not to purchase the equipment at the end of the contract.
With a TRAC lease, for example, you may determine that you would rather make smaller payments up front because you don’t plan to take ownership of the equipment when the contract ends. Instead, it will be sold off to a third party when you return it to the lessor. If the amount of the final sale ends up being higher than your residual, the lessor will give you the difference. However, if the amount is lower, you owe the difference. One variant is the zero TRAC lease, which amortizes to zero. When the lease ends, you can purchase the equipment for a fair market price and your payments will be credited to it. This means you may only need to pay sales tax.
Benefits of the TRAC Lease
There are several reasons why a TRAC lease might make sense for your operations. In addition to potentially lowering the amount you spend per month, this type of lease also typically requires a much smaller down payment. This means you can save more money up front. Another advantage is that sales tax is spread across your payments, rather than being paid in full at registration. Your payments also are fully tax deductible.
Choose Union Leasing
As part of our larger fleet management services, we have the expertise to offer you TRAC leases as well as many other leasing options. We can assist you with fixed or floating rates to fit your company’s specific circumstances and requirements. To learn more or to get started, reach out to us today and speak with one of our knowledgeable representatives.