people applying for TRAC Lease

3 Factors to Consider Before Getting a TRAC Lease

Business owners can get a favorable TRAC lease when they negotiate with their lessor. Here, Regents Capital lists factors can be negotiated.

A TRAC lease, also known as a Terminal Rental Adjustment Clause lease, is a trailer and motor vehicle lease that enables adjustments to payment residuals, lengths, and terms while the lease is active. Instead of going through the trouble of getting financing for each trailer, car, or truck, a business owner can negotiate this kind of lease. They will rent the vehicle for a fixed period and has the option to buy it at the conclusion of the lease at an agreed-upon price.

When you are applying for a TRAC lease to meet your business needs, you want to get a favorable deal from your lessor. Here are a few factors that are up for negotiation:

The TRAC Lease Document

The master lease agreement, much like any legal document, has “boilerplate” provisions. Some of them may be negotiable.

One example is the cancellation notice. Many agreements come with boilerplate terms requiring a fixed notice both parties must provide to cancel. This is unnecessary (and up for negotiation) given that the master agreement cannot compel the lessee to lease anything.

Another provision is the state’s laws that will govern the TRAC lease agreement. This is often negotiable. As a lessee, you can cite the laws of your state rather than going with your lessor’s state.

Although boilerplate provisions help save time in negotiations, you should remember to change parts of the agreement to make the TRAC lease more advantageous for your business.

Billing & Payment Terms

You also have the option to negotiate the specific terms for billing. When discussing the agreement, you can make sure that the lessor accurately establishes the in-service date on the document.

Another area that is up for negotiation is the service level agreement. You can work with your lessor on the following details:

  • The billing termination date
  • The adjustment booking date
  • The sale date

Depending on the lender, another billing component you can discuss is the deficit interest charges. This amount isn’t large if you’re just looking at one vehicle unit.

If the agreement involves a fleet of a hundred vehicles, for instance, these charges can add up and turn into a large expense. Depending on the level of competition of the business and the fleet size, your lessor may choose to forgo this additional payment.

End of Term Options

TRAC leases combine all the advantages of leasing while retaining many of the upsides of ownership including the option to purchase the equipment at the end of the lease term. When your TRAC lease ends, you typically have the option to:

  • Purchase the equipment at the end of the lease term at a pre-determined residual agreed to when the lease starts.
  • Continue to lease the equipment at a reduced rate with payments based on the residual value amount.
  • Return the equipment to the lessor.

Depending on your cash flow needs, you can select a higher end-of-term residual amount for a lower monthly payment or keep the end-of-term residual lower to pay more through the stream of payments. This flexibility of payment options makes the TRAC Lease attractive to any business trying to improve their financial performance ratios and better manage their liquidity position and cash flows.

Turn to Regents Capital for Your TRAC Lease Needs

Regents Capital Corporation offers TRAC leases that you can use for over-the-road vehicles, such as trailers, tractors, and trucks. By working with us, you will enjoy flexible payment terms from 24 to 72 months depending on your business needs. You will also avoid compensating balance requirements, blanket liens, rate escalator clauses, restrictive covenants, and other surprises in conventional lending restrictions.

Fill out our contact form today, and we will have one of our agents meet with you to learn about your unique business needs.