Working through considerations in the choice to take the route of a traditional loan, TRAC lease or full-service lease (with maintenance contracts included but no option to purchase at end) toward acquiring equipment, consider all terms, particularly with respect to lease agreements. Individual owner-operators' situations will vary, but working with an equipment dealer/leasing company, consider doing all of the following that apply:
- Spec the most common type of truck for your application to maximize resale value.
- Compare the stated residual value with the resale value of a similarly aged truck. Ask to see the truck’s maintenance records before signing the lease.
- Don’t rush. Check out two or more lease deals. If possible, have an accountant or attorney look at the deals. Try to negotiate.
- Get a written cost comparison between an outright purchase and a lease from each dealer. Have your accountant assess each.
- Make your lease term as short as possible, and know what happens at the end of the lease.
- Make sure there are no mileage limitations. If there are, make sure they're well within the mileage plans of your operation. Be aware of alteration restrictions.
- Unless you're in a full-service lease where you're not responsible for most maintenance, make sure warranties pass through to you.
- Find out when payments are due and what to do in case of an accident or damage.
- Understand the conditions under which you can get out of the lease.
- Before signing a lease, consider maintenance funds with respect to what you're responsible for.
- Understand how the IRS views the agreement. If the lease does not include a buy option, you will never be able to depreciate the vehicle on your taxes, but during any lease's term you will write off payments as an expense.
- Read the fine print on lease agreements to look out for insurance requirements. Some will include a requirement for “any auto” coverage, which can be difficult to obtain for owner-operators.
The following comparison table charts three different acquisition scenarios in 60 months deals to illustrate common terms and outcomes of traditional loans, TRAC lease with purchase options at term's end, and a full-service lease/rental scenario. Terms reflect a those of buyer/lessee with experience and good credit ratings.
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