TRAC Lease

What is a TRAC Lease? Commercial open-end lease guide for fleets

A TRAC lease is a specialized financing option for businesses that need flexibility and potential tax advantages. Keep reading to learn what they are, how they work and whether they’re right for your business.

What is a TRAC lease? Terminal rental adjustment clause explained

A TRAC lease, or Terminal Rental Adjustment Clause lease, is a type of open-end lease designed for commercial vehicles. In an open-end lease, your business has more flexibility than with a standard closed-end lease. Instead of fixed terms and mileage limits, you agree to be responsible for the residual balance. That means you'll settle the difference between the vehicle's estimated residual value and the actual resale value at the end of the lease.

This means if the vehicle's trade-in value is more than expected, your business benefits. If it is less, you cover the difference.

TRAC leases are a good fit for fleets with unpredictable mileage because their flexibility makes it easier to adjust as needs change.

TRAC lease vs. closed-end lease: Key differences for fleets

TRAC leases differ from standard closed-end leases in several ways:
Residual value risk: In a TRAC lease, your business assumes responsibility for the vehicle’s residual value at lease end.
Flexibility: TRAC leases often allow higher mileage and less restrictive terms,1 ideal for businesses with heavy vehicle use.
Payment structure: Payments may be lower during the term, but final settlement depends on resale value. 1Subject to GM Financial’s guidelines. Open-end lease vs. closed-end lease
Open-End Lease (TRAC) Closed-End Lease
Residual value risk Business assumes responsibility for residual value Lessor assumes responsibility for residual value
Flexibility High mileage and adjustable terms Fixed mileage limits and strict terms
End-of-term costs If not purchased, business responsible for vehicle settlement for trade-in value or sell price at auction If not purchased, business responsible for excess wear and use charges, if applicable
Ideal for Fleets with variable usage and high mileage Fleets with predictable usage and mileage
Tax considerations May offer potential deductions (e.g., Section 179) Write off entire payments


Tax benefits and considerations

TRAC leases may offer tax advantages, such as potential deductions under Section 179 tax benefits. These benefits vary by business type and should be confirmed with a tax professional.

Total cost of ownership and TRAC leases

Total Cost of Ownership (TCO) is everything your business spends on a vehicle during the lease, including monthly payments, maintenance, insurance and any end-of-term costs. TRAC leases offer flexibility, but because you take on residual value risk, your total cost can vary more than with a closed-end lease.

Is a TRAC lease right for your business?

TRAC leases are often suited for companies that: Need help choosing the right leasing or financing option for your business? Request a custom fleet assessment Save time at the dealership by completing our online form. Start your commercial financing request 1Subject to GM Financial’s guidelines.
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