Terminal Rental Adjustment Clause Lease (TRAC)

Terminal Rental Adjustment Clause Lease (TRAC)

The terminal rental adjustment clause (TRAC) lease is an equipment lease specially designed for vehicles and trailers that go over the road. This can be a big truck for a trucking business, smaller trucks for delivery services, or company fleet cars. Additionally, a TRAC equipment lease can also cover trailers, if they are used in an over the road function such as hauling.

Benefits of a TRAC

There are some very specific benefits associated with a TRAC equipment lease. The terminal rental adjustment clause lease is just that: a lease that contains a clause that specifically allows you a purchase price that is agreed upon at the time of the lease. When the lease is up, you purchase the vehicle or trailer for the fixed price. For the most part, this fixed amount is a percentage of the equipment's initial value. Some of the advantages associated with this method of leasing equipment are:

• You do not have to make a down payment. A lease may require an upfront initial payment, but it is usually smaller than the down payment you would make to purchase the equipment outright.
• On a lease, you can arrange to have special payment options, such as seasonal payments, and deferred payments. You can also make use of step-down or step-up payments to meet your cash flow requirements.
• Own the machine at the end. If you choose to complete the purchase at the end of the TRAC lease, you enjoy all ownership rights.
• The equipment's residual price is guaranteed, so at the end of the lease term, you know exactly what you will have to pay to buy the vehicle or trailer. There is no reevaluation of the value, and no price haggling.
• Much easier! It is easier to obtain a terminal rental adjustment clause lease than it is to get financing from a bank in some cases.

Most business owners who take advantage of the TRAC equipment lease do so because they know they will buy the equipment at the end of the lease term. If, however, the company decides not to purchase at the end, there are some issues that will have to be resolved. If you choose not to buy the vehicles or trailers leased under a TRAC lease agreement, then you may have to pay the deficiency between the net sale price and the fixed purchase price. This means that if the car will not sell for at least as much as the agreed-upon price in the purchase option, you will have to make up the difference. This is because the leasing company expects, due to your agreement, to receive a certain amount of money.

Convenience of a TRAC

For businesses that need to buy vehicles and trailers, this is a very convenient way to obtain the necessary equipment without having to pay out a great deal of money up front. The monthly payments are usually more manageable, and the fixed price at the end of the lease is usually very reasonable. TRAC leases generally last from two to five years; the longer the lease term, the smaller the fixed purchase price at the end.