An Open-Ended or Terminal Rental Adjustment Clause (TRAC) lease provides the greatest flexibility. With this type of lease your payments are usually lower than conventional financing and they have no mileage or wear and tear provisions. Closed-Ended commercial leases are also available.
Commercial Leasing provides many financial, accounting and productivity benefits.
Some of those are:
- Preserve working capital and liquidity for other corporate capital expenditures
- Off-balance sheet accounting
- No down payment
- Lower payment than conventional financing
- Potentially reduce taxes. Leasing is recognized as a tax-deductible expense by state and federal agencies and is not an "add back item" in calculating AMT. In addition, leasing provides sales tax exemption on acquisition price of the vehicle in most states. (Where rental tax is collected on the monthly lease payment.)
- Shorter lease terms mean you can replace vehicles more often and avoid maintenance costs.
- Simplifies record keeping for tax purposes, budgeting, and cost controls.
A TRAC lease expense may be designated as operating leases under FASB 13 and can be foot-noted as off-balance sheet items. This may enable you to improve ROA, avoid leverage restrictions and potentially improve reported earnings.
TRAC Terms
- Car and truck financing - 24 to 60 months
- You select the residual value
- Insurance requirements- $300,000 combined single limit for cars and light trucks
- $500,000 combined single limit for medium/heavy trucks
- $1 million combined single limit for tractors (deductible $1000 cars and light trucks; $2,500 medium/heavy trucks).
TRAC Eligibility
- Company must be in business for at least two years.
- Personal Guarantor required if lessee owns more than 10% of the business.
- Vehicles must be used for commercial purposes at least 50% of the time. Includes all makes and models of new cars, light trucks and medium/heavy trucks.
- Usage is limited to commercial purposes only. Units used for livery, rental or driver education are not eligible.
NOTE: This information is based on accepted accounting principles and interpretations. It is intended to help you understand Commercial Leases. This is not to be considered tax or legal advice. Always consult with a qualified tax or legal advisor regarding any aspect of the federal tax code.
- Locate a vehicle you want to lease or finance for your business. We can help you find a vehicle and negotiate a competitive purchase price and our partnership with Commercial Truck Trader has listings of over 86,000 trucks to choose from!
- Select a lease or finance offerYou specify the vehicle(s), select the dealer, and negotiate the purchase price.
- LeaseCompare.com purchases the vehicle(s), completes the lease documents and handles licensing and title documents. Credit approval is handled by a national bank.
Whether your vehicle fleet size is one or one hundred our fleet vehicle management services give you piece of mind and the ability to control costs so you can spend more time growing your business.
A good preventive maintenance program saves you money on repairs and reduces vehicle down time and costs. You don't need personnel or spend resources to organize and implement a good vehicle management program. We can do it for you!
Each vehicle or driver is issued a National Account Card by our strategic partner, Network. This card is used for minor repairs and routine maintenance. The card has a spending limit set by you. Costs that exceed the spending limit need your authorization.
A toll free number connects drivers to a service center that's open 24/7 365 days a year. Any needed repairs, parts or tire purchases have contracted prices with a national network of Service Providers. The work is paid for by Network and invoices are audited for accuracy.
Preventive maintenance helps eliminate the need for expensive extended warranties that may never be used. Your vehicles will have a preventive maintenance schedule customized for each vehicle based on mileage intervals.
Unscheduled maintenance is managed for you by in-house ASC certified technicians who'll take charge of the situation ensuring the correct service is performed at the right price.
If you prefer a local shop to perform your work they may be authorized by Network as your service provider.
At the end of the month you're billed for all the expenses your vehicles have incurred in a single, itemized invoice.
Fuel Management - Fuel cards allow drivers to purchase fuel nationwide by entering a secure PIN (or driver ID) and the vehicle's current odometer reading at the pump. Monthly reports show you fuel and non-fuel purchases, multiple daily fill-ups and over-filling of vehicle tank capacity, and more.
Preventive maintenance and unscheduled repairs are only the beginning. Commercial vehicles on the road almost every day of the year are bound to have unforeseen problems. We're here to help.
A Menu Of Additional Services - Used As Needed
Post-Warranty Recovery - It happens all the time. A vehicle is just out of warranty and a major repair is needed. We have people who are experts at dealing with the manufacturers to get post-warranty repair costs recovered for you. There is no cost to you if this effort is unsuccessful. Price a transmission lately?
Registration Renewal Management - The system flags registrations that are expiring within 90 days to ensure the delivery of the renewed registration to your office or the correct driver.
Accident Reporting - Trained customer service representatives are on call 24 hours a day ready to record all the details you and your insurance company will need.
Collision Repair - An experienced and qualified staff of certified technicians will ensure that your vehicles get repaired quickly, cost-effectively and properly.
Emergency Roadside Service is a phone call away 24 hours a day, every day.
Subrogation - This service is great for a small business owner who wants to avoid additional legal fees. Do you like dealing with insurance companies, uninsured motorists and lawyers? Didn't think so.
If warranted, we'll pursue a larger settlement if you're unhappy with what's offered. If we get you a larger settlement amount the charge is 25% of the additional funds. There's NO FEE if we're unsuccessful.
Driver Record Checks can be run on potential and current employees and delivered in a secured written report.
Glass Repair/Replacement by automotive glass services who will work at a drivers' home or office.
Rental Vehicles - A single phone call is all it takes to get your driver a needed rental vehicle at specially negotiated rates throughout the US. If your vehicle is in for repairs Network's experts track the repair of the vehicle, ensuring minimal downtime and saving you unnecessary expenses.
If you're business owner or manager already stretched thin this inexpensive, yet comprehensive, vehicle management program takes a big burden off your shoulders. At the same time your customer service will improve and vehicle operating costs lowered.
