TRAC Lease: Definition and Advantages
When choosing financing options for equipment in your business it is crucial to know some of the options available ahead of time to make the best choice for you.
A popular financing option that you may hear about is a TRAC Lease. TRAC stands for Terminal Rental Adjustment Clause. There are a number of advantages to a TRAC Lease that could keep cash in your business, provide low payments, and offer some tax incentives as well.
The first advantage of a TRAC lease is a fixed term and a guaranteed residual buy-out. This means you will know your payments and the cost of buying out at the lease maturity (full term of the lease). In other words, the purchase price of the equipment is set from day one of the lease. Unlike a Fair Market Value Lease where the final value of the equipment is determined at the end of the lease, the TRAC lease provides you with the end value of the equipment from the start.
The second advantage (with the guidance of your tax professional) is the full payment on a TRAC Lease can be deducted as rent from your taxes. This could allow you to minimize your taxes with financing.
The third, and arguably largest advantage of the TRAC Lease is that it will generate the lowest payment and allow you to keep cash in your business. This is due to the fact you will not be making payments on the residual value of your equipment. That is saved until the lease ends. The payment is also reduced because interest equivalents are lower. You are paying “rent”, and the funder is taking depreciation as a cost-saving and passing it along to you.
If a TRAC lease sounds appealing to you, Trinity Capital can help. Currently, Trinity Capital is offering the longest terms available on used Trinity trailers and flexible terms on heavy equipment for trucking, construction, and many others. We are ready to assist when you need financing most. Give us a call at 833-659-2203 or visit us at mytrinitycapital.com to learn more!
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