ss_blog_claim=bd50edc517cf0b7549fe6b5f63b6b5f8 The SLS Business Finance Blog: Other Equipment Types for TRACs

Thursday, November 13, 2008

Other Equipment Types for TRACs

The TRAC lease is most common for transportation. However, any lease that has a residual value purchase option that is other than 10%, $1 or Fair Market Value (FMV) can also qualify as a TRAC lease. These 3 are the most common lease structures but what about a piece of equipment like a PC. After 36 months its not worth very much. If the negotiated price is 5% of the value new then its both a FMV lease and a TRAC lease. All TRAC leases are FMV but not all FMV leases are TRACs. Why? Because FMV leases have no adjustments to them during or at the end of the term like a TRAC can. What's important to remember is that both qualify as Operating Leases for maximum tax deductibility.

Southern Lending Solutions

1 comment:

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