The TRAC Lease
Have you questioned if a TRAC lease was the right choice for your business? Do you know what a TRAC lease is? Let’s quickly cover the definition of a TRAC lease and the Top 5 benefits the TRAC lease can have on your bottom line.
The TRAC (Terminal Rental Adjustment Clause) lease is a lease on a titled asset intended for commercial use more than 50% of the time.
The Top 5 Benefits
- You save upfront money
Compared to a loan which typically requires 5-20% down, a TRAC lease does not require a large down payment. The TRAC lease has a lower barrier of entry. You get the equipment needed for your business and keep more money in your pocket.
- Your monthly payments are fully tax deductible
We are the Lessor and titled owner on the asset, and you are the lessee. We get the depreciation benefits. You get to write off your monthly payments in full as a rental expense for tax purposes.
- You have lower monthly payments
Since we get the depreciation benefits, we pass those benefits on to you in the form of lower monthly payments. These payments are fixed for the life of the contract, so as the market changes it has no effect on your contract.
- Your sales tax is on the stream of payments
Unlike loans which require the entire amount of sales tax due at registration, on a TRAC lease the amount due will be spread across your stream of payments. You pay the tax slowly over the life of the lease instead of all at once. Again, keeping more upfront money in your pocket.
- Your end of contract options
At the end of your TRAC lease contract you have (4) options:
- Your equipment can be purchased for the predetermined “residual value.” You cut us a check, and we sign the title over to you free & clear.
- You can continue to lease the equipment with payments based upon the residual value. Once it’s paid off, ownership will be transferred to you.
- You can return the Equipment to us. We will get 3 competing bids for the purchase of the equipment. You will receive any equity from the sale and will be responsible if there is a deficiency.
- You can sell the equipment to a buyer of your choosing. You retain any equity for the sale or will be accountable for the difference between the sales price and payoff amount on the lease at that time.
If you are interested in what else the TRAC lease has to offer, please contact one of our lease representatives to find out more or complete a credit application here to see if you qualify.