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TRAC LEASE
TRAC LEASE (Used For Vehicles, Residuals Range From
20%-35%)
The TRAC (Terminal Rental Adjustment
Clause) lease is a special type of FMV truck
lease specifically for rolling stock and commercial
vehicles.
A TRAC lease permits an adjustment in the
rental (lease) rate, to be calculated upfront (unlike
a traditional FMV lease), based on the amount expected
to be realized by the lessor upon sale of the leased
vehicle (i.e. through a higher residual), which in turn
allows for:
TRAC leases can be ideal for small to mid-size distributors,
manufacturers & trucking companies with fleets of
5 to 100 trucks, tractors & trailers.
The Terminal Rental Adjustment Clause or TRAC
Lease allows for a residual to be declared at the lease
inception. This unique provision in the tax law provides
for the Lessor and Lessee to agree on a residual amount
that is disclosed in the documents.
This guaranteed residual value allows the Lessor
to depreciate the equipment and pass on a lower interest
rate and monthly payment cost to the Lessee. The Lessee
can then use the TRAC Lease as a tax shelter, to reduce
taxable income by using the lease as a 100% tax write-off,
operating expense.
A TRAC lease provides 100% financing with terms
from 24-72 months.
OFF Balance Sheet Financing can be structured so the
equipment doesn't appear as an asset or a liability
on the balance sheet.
TRAC leases have the following options at the end
of the Lease:
a) Purchase the equipment at the predetermined price
b) Return the equipment to the Lessor
If the equipment is returned, the Lessor (JB2 Funding)
will sell the asset in a commercially reasonable manner.
If the equipment is sold for more than the amount
of the predetermined residual, the margin or excess
amount is paid back to the Lessee. If the amount is
less than that required, then the Lessee pays the difference
to JB2 Funding or the Lessor.
We advise you to consult with your tax advisor or accountant
to decide which option may be best suitable for your company. |
Credit
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