What You Need to Know About Leasing

What You Need to Know About Leasing
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This story appears in the October 2015 issue of Entrepreneur. Subscribe »
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Leasing

Terminal rental adjustment clause leases let you keep less capital tied up in your vehicles. At the outset of the loan, you negotiate for a higher end-of-term value for the vehicle, meaning you finance less on a monthly basis but will owe more at the end of the term. But you still get to deduct the higher true-market value of the lease on federal taxes.   

At the end of the term, you can buy the vehicle for the negotiated amount, trade up to newer equipment or refinance the lease for the remaining value of the vehicle, essentially extending the loan so you can continue to manage costs. In general, given the tax advantages, a TRAC lease is more cost-effective than other financing options. 

Edition: March 2017

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