TRAC Lease
What is trac lease? A TRAC lease (Terminal Rental Adjustment Clause) is an open-end commercial truck lease that sets a residual value up front and trues it up against the actual sale price at lease end.
Full definition
TRAC leases are the standard commercial vehicle lease structure for fleets and owner-operators who want lease-style monthly payments and depreciation treatment but retain control over the truck's residual. The lessor sets a residual value at signing; at lease end, the truck is sold or the lessee buys it at that residual.
If the truck sells above the agreed residual, the lessee captures the upside. If it sells below, the lessee owes the difference. That gain-or-loss true-up is the Terminal Rental Adjustment Clause and is what separates a TRAC lease from a true closed-end lease where the residual risk sits with the lessor.
TRAC leases qualify as operating leases for tax purposes when structured correctly — monthly payments are fully deductible as a business expense rather than being capitalized as a loan principal + interest split. That treatment makes them especially attractive to mid-sized fleets managing tax liability across many trucks.
For owner-operators, TRAC leases reduce cash outlay versus financing the same truck, but the residual exposure means a soft used-truck market can produce a lease-end check the carrier owes the lessor. Run the math on residual realism before signing.
Example
- A $140,000 tractor on a 48-month TRAC lease with a $42,000 residual: if the truck sells for $48,000 at lease end, the lessee receives $6,000. If it sells for $36,000, the lessee owes $6,000.