TRAC lease

A TRAC lease is a vehicle lease with a terminal rental adjustment clause: a residual value is set up front, and at the end the lessee pays or receives the difference between that residual and the truck's sale price. It is common for commercial trucks leased by businesses that plan to keep them.

In practice: how the TRAC adjustment works

EXAMPLE figures. Choose a low residual and your payments rise but the end risk shrinks; choose a high residual and the payments fall but you may owe a large adjustment if the truck sells for less.

In plain terms, a TRAC lessee carries the truck's value risk, much like an owner, while the lessor holds title during the lease. Repairs are usually on you too, unlike a full-service lease.

The tax rule behind it

Under 26 U.S.C. 7701(h), a terminal rental adjustment clause is a provision that adjusts the rent up or down based on what the lessor gets when it sells the vehicle, and that clause alone does not turn a qualifying motor vehicle lease into a sale for federal tax purposes. In a true lease the lessor owns and depreciates the truck under IRS Publication 946. Ask a tax professional how your own agreement will be treated.

Compare a TRAC lease against buying in lease vs buy a truck, check the clauses in our commercial truck lease agreement template, and run the numbers in the lease-purchase vs own calculator.

Related terms

Residual value, full-service lease, balloon loan, section 179 deduction. See the full trucking glossary.

Whatever the lease, the truck has to cover it every month. Our owner-operator dispatch service books loads at rates that do, and each rate con comes to you to sign.