ss_blog_claim=bd50edc517cf0b7549fe6b5f63b6b5f8 The SLS Business Finance Blog: On the Right TRAC

Wednesday, November 12, 2008

On the Right TRAC

TRAC leases have an adjustment clause that can be enforced in an Open ended TRAC lease. We advise our clients to only use an open ended TRAC for transportation since they can influence the purchase price through maintenance, wear and tear and usage. The residual buyout price adjusts, however, the purchase option remains so regardless of price, you can return the car.

The rate for a TRAC is almost always lower than the rate for a Finance(Capital) Lease since the residual becomes an area where the leasing company can make $$. Think of the car where it can be purchased for $15k after 36 months or returned. Well if sold, they profit and if returned and remarketed and sold for any amount over their adjusted price they profit. In return for that opportunity to profit, the lease rates and payments go down so its a win/win situation.

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