What Is Meant By A TRAC Lease?
A Terminal Rental Agreement Clause Lease, otherwise known as a TRAC lease, is essentially an affordable way for business owners to lease vehicles for the operation of their businesses without paying through the nose for financing. The name says it all, it is a lease that contains a clause that sets an agreed upon purchase price for each vehicle.
At the end of the lease, you have the option to purchase it for that price, which is basically a percentage of its original value. Sounds pretty good, doesn’t? It is good and there are in fact, even more advantages to this lease agreement that many may overlook.
Want to know more about what a TRAC lease is and how it can benefit your business vehicle needs? All of us here at Sun South Lease want to see your business thrive, so call us today for an immediate consultation.
No Down Payment Required
For businesses strapped for operating capital, a TRAC lease can be a godsend when it comes to setting up their initial fleet of needed vehicles. Unlike traditionally leasing a vehicle from a dealer or through a financial lender, there is usually no requirement to put down a substantial down payment to obtain the vehicles you need to operate your business. Some leasing programs may require an initial payment upfront, usually equal to the monthly payment for the lease agreement but that is it.
What is Included In This Type of Lease?
Just like with other types of equipment lease financing agreements, you have the option of purchasing the leased equipment at the end of the lease.
However, this lease allows for a set price to be negotiated from the beginning, and that will be the price that you pay for the vehicle, no matter what. This is an economical way of financing vehicle purchases, without worrying about the vehicle’s purchase price being reevaluated to match current market values.
Making the monthly payments with this type of lease is much more flexible than other types of a capital equipment lease. This type of lease will run anywhere from two to five years and during that time you have several payment options at your disposal.
If your business is a seasonal one, then you can arrange to make seasonal payments instead of regular monthly payments, for example. If you experience cash flow issues, you can adjust the monthly payment accordingly. Much more flexible than most other leases, and is so much easier to obtain.
Tax Benefits
The fixed or residual price per vehicle at the end of the lease is very affordable, and also allows the purchaser the full benefits of ownership, including tax benefits. You can take advantage of depreciation on each one, and as a TRAC lease is treated by the IRS as a true lease, your lease payments prior to purchase will be considered tax deductible as well.