Which Lease Program Is Right for You?

Central Leasing Corporation offers a number of different types of leases. The one that is right for you and your company depends on the type of equipment you’ll be leasing, the length of time you’ll be leasing, and whether you will be keeping the equipment at the end of the lease. Here are descriptions of some of the most common types of leases:
 

Operating (or True Tax) Lease

• Term is shorter than expected useful life of equipment.
• Lease payments do not cover the cost of equipment during the initial lease term.
• At the lease’s end, the equipment is returned to the lessor or can be purchased at its Fair Market Value.
• Lease payments are expensed and the asset is not added to the company’s balance sheet.

TRAC (Terminal Rental Adjustment Clause) Lease

• Exclusively for qualified motor vehicles and trailers.
• The term is shorter than the expected useful life of the equipment.
• Lease payments do not cover the cost of the equipment during the initial lease term.
• Lease payments are expensed and the asset is not added to the company’s balance sheet.
• At lease’s end, both lessee and lessor share in residual sales value of equipment.

First Amendment Lease

• Designed specifically for equipment with shorter useful life.
• Lease payments are expensed for tax purposes.
• Lease payments do not cover the cost of equipment during initial lease term.
• At lease end, lessee can either purchase the equipment or renew the lease.

Capital Lease

• Ownership of equipment is automatically transferred to lessee at the end of the lease term.
• Includes bargain purchase option (typically $1 or 10 percent).
• Treated as a loan for accounting purposes.
• Lessee is also treated as owner for tax depreciation purposes.