Benefits of a TRAC Lease for Business Vehicles
A TRAC lease can give businesses more flexibility in how they acquire, operate and replace commercial vehicles while helping manage cash flow, mileage, upfits and future fleet needs.
Why Do Businesses Use TRAC Leases?
For businesses that depend on commercial vehicles every day, the way those vehicles are financed can affect cash flow, replacement planning and the overall cost of operating a fleet.
A TRAC lease can provide businesses with more flexibility than a traditional vehicle loan or consumer-style lease.
The biggest advantage is not simply getting a different monthly payment.
TRAC leasing can give a business another way to manage how much capital is tied up in vehicles, how often vehicles are replaced, how commercial upfits are handled and how future vehicle needs are planned.
For companies operating several trucks or vans, those advantages can become increasingly important as the fleet grows.
TRAC Lease Benefits at a Glance
TRAC leasing is designed around commercial vehicle use. These are some of the reasons businesses may consider Ford CommerciaLease as part of their fleet strategy.
TRAC leasing can help businesses manage vehicle costs, mileage, commercial upfits and planned fleet replacement.
Preserve Working Capital
Commercial vehicles can require a significant amount of money, especially when a business needs several vehicles at the same time.
Depending on the lease structure, TRAC leasing can allow a business to acquire needed vehicles while preserving more working capital for other parts of the operation.
That cash may be needed for things such as:
- Payroll
- Equipment
- Inventory
- Marketing
- Expansion
- Hiring
- Building improvements
- Other operating expenses
For a growing business, this can be especially important.
A company may need more vehicles because it is adding technicians, expanding into new areas or taking on additional contracts.
Being able to add vehicles without tying up as much operating cash may help support that growth.
Cash flow should be part of the vehicle decision. A lower amount of cash tied up in vehicles may give the business more flexibility elsewhere, but the total lease cost and long-term strategy should still be considered.
Potentially Lower Monthly Payments
A TRAC lease can sometimes produce a lower monthly payment than financing the entire vehicle purchase over a comparable term.
The reason is the residual value.
Instead of structuring the transaction as though the vehicle has no remaining value at the end of the lease, a residual amount remains at lease-end.
That can reduce the amount being accounted for through the scheduled lease payments.
Simple Example
Imagine a business acquires a $70,000 commercial truck.
With traditional financing, the business generally makes payments toward the financed purchase balance over the selected term.
With a TRAC lease, part of the vehicle’s expected value remains as the residual at the end of the lease.
That may reduce the monthly payment depending on the structure.
However, businesses should not focus only on getting the lowest possible payment.
A higher residual can reduce the monthly payment, but it also leaves a larger amount at lease-end.
The better goal is to choose a residual and lease structure that make sense for the vehicle’s use, mileage and planned replacement cycle.
No Mileage Restrictions or Mileage Penalties
This can be one of the most useful benefits for commercial customers.
Ford states that CommerciaLease has no mileage restrictions or mileage penalties.
That matters because commercial mileage can be difficult to predict.
A plumbing van may travel 20,000 miles one year and significantly more the next.
A contractor may win a large project that requires employees to travel farther every day.
A delivery company may add new routes or expand its service area.
Commercial vehicles are there to support the business, and their mileage often changes as the business changes.
Ford CommerciaLease does not require the business to structure its operations around a traditional annual mileage allowance.
No Traditional Excess Wear-and-Use Charges
Work vehicles are expected to work.
A commercial van may carry tools and parts every day. A pickup may travel onto construction sites. A service truck may have employees entering and exiting the cab dozens of times during the workday.
Ford states that CommerciaLease does not have the traditional excess wear-and-use charges associated with many closed-end leases.
That can make the structure more practical for commercial use.
Vehicle condition still matters because it can affect the vehicle’s market value when the business eventually sells or trades it.
But the business is not dealing with the same type of traditional lease-return inspection associated with many consumer-style closed-end leases.
Commercial Upfits Can Be Included
Many commercial customers are not simply buying a truck or van.
They are buying a completed work vehicle.
A Ford Transit may need:
- Shelving
- Interior partitions
- Ladder racks
- Tool storage
- Refrigeration equipment
- Electrical equipment
A chassis cab could receive a:
- Service body
- Dump body
- Flatbed
- Landscape body
- Utility body
- Specialized vocational upfit
These upfits can represent a significant portion of the completed vehicle’s total cost.
Ford CommerciaLease allows commercial upfits to be included in the total vehicle value, and Ford states that upfits can be residualized.
This can allow the vehicle and its commercial equipment to be considered together instead of treating the upfit as a completely separate expense.
Because different upfits can retain value differently, the vehicle and equipment should still be evaluated carefully when establishing the lease structure.
A Better Fit for Planned Fleet Replacement
One of the biggest advantages of TRAC leasing may become more noticeable several years after the vehicle is first acquired.
Businesses can use the lease term as part of a planned replacement schedule.
Instead of buying a truck and keeping it until it becomes unreliable, the business can establish a more predictable vehicle cycle.
This allows the business to begin planning the replacement vehicle before the current vehicle becomes a problem.
For a company operating 20, 50 or 100 vehicles, that can be easier to manage than reacting to breakdowns and unexpected replacement needs.
Planned replacement can also reduce the chance of several older vehicles needing replacement at the same time.
Trade the Vehicle Into Its Replacement
A TRAC lease vehicle does not necessarily need to be treated as an isolated transaction when it is time for replacement.
When the business is preparing to acquire another truck or van, the current vehicle can potentially be appraised by the dealership.
The dealer can evaluate:
- Current market value
- Vehicle condition
- Remaining lease obligation
- Replacement vehicle needs
The business can then decide whether trading the current vehicle toward its next commercial vehicle makes sense.
The dealership may gain a desirable used commercial vehicle that can be reconditioned and offered for sale, while the original business moves into a newer truck or van.
Keep Your Fleet Looking Newer and More Professional
A commercial vehicle does more than move employees, tools and equipment.
It represents the business.
A service van may display the company’s name, logo, phone number, website and services across the side of the vehicle.
In many cases, that truck or van is a moving billboard.
Keeping newer, well-maintained vehicles in service can help the business maintain a professional image when employees arrive at customer homes, businesses and jobsites.
Newer vehicles may also provide access to improved:
- Safety technology
- Driver-assistance systems
- Connectivity
- Telematics
- Productivity features
- Fuel efficiency
- Reliability
Your fleet is part of your business image. A planned replacement cycle can help keep commercial vehicles looking professional while bringing newer technology into the fleet.
Better Control Over an Aging Fleet
One of the most expensive fleet problems can be keeping vehicles too long.
As commercial vehicles age, businesses may begin dealing with:
- More frequent repairs
- Unexpected downtime
- Rental vehicle expenses
- Lost technician productivity
- Missed appointments
- Towing costs
- Higher maintenance expenses
- Reduced employee confidence in the vehicle
A vehicle being fully paid off does not automatically mean it is inexpensive to operate.
There can be a point where repairs, downtime and lost productivity make keeping an aging vehicle more expensive than replacing it.
TRAC leasing can support a more structured replacement strategy because the business is already thinking about the vehicle’s future value and replacement point when the lease is established.
Ford Commercial Line of Credit Can Support Multiple Vehicle Needs
TRAC leasing becomes even more useful when a business regularly acquires several vehicles.
Ford offers qualified commercial customers a Commercial Line of Credit, commonly called CLOC.
A CLOC provides a pre-established amount of commercial credit that can be used for eligible vehicle purchases and leases, subject to Ford Credit approval and current program requirements.
Ford indicates that CLOC can be used with CommerciaLease.
Example: A Growing HVAC Company
The company expects to:
- Replace two vans in the spring
- Add another van during the summer
- Replace two service trucks in the fall
- Factory order several vehicles for the following year
Instead of approaching every vehicle as an entirely new credit event, the business may be able to establish a commercial line of credit and use it as part of its ongoing vehicle acquisition strategy.
Fleet plan → CLOC → Factory order → TRAC lease or finance → Upfit → Delivery → Future replacement
You Do Not Have to Finance Every Vehicle the Same Way
One of the most important things for business owners to understand is that every vehicle in the fleet does not need to use the same financing structure.
TRAC leasing may make sense for some vehicles while traditional financing may be a better choice for others.
Example
A delivery van that accumulates high mileage and is replaced regularly may be a strong candidate for TRAC leasing.
A specialized truck the business plans to keep for ten years may make more sense with traditional financing.
A lightly used management vehicle may use another structure entirely.
The better approach is to consider each vehicle based on:
- Vehicle type
- Annual mileage
- Expected useful life
- Upfit cost
- Replacement timing
- Business cash flow
- Expected resale value
What Types of Businesses May Benefit From TRAC Leasing?
TRAC leasing can be useful across many types of businesses and industries.
- HVAC companies
- Plumbing contractors
- Electrical contractors
- General contractors
- Roofing companies
- Landscaping businesses
- Pest control companies
- Delivery companies
- Utility contractors
- Telecom contractors
- Service companies
- Construction companies
- Municipal fleets
- Fleet management companies
- Businesses with multiple locations
- Companies operating growing fleets
The number of vehicles alone does not determine whether TRAC leasing makes sense.
A five-vehicle business with high annual mileage and regular replacement needs may benefit more than a much larger fleet that keeps vehicles for a very long time.
The decision should be based on how the fleet actually operates.
When Might Traditional Financing Be Better?
TRAC leasing has several useful features, but it is not automatically the best choice for every commercial vehicle.
Traditional financing may be worth considering when:
- The business wants long-term ownership
- The vehicle will remain in service well beyond a typical lease term
- The company plans to operate the vehicle long after payments are completed
- The upfit has a very long useful life
- The vehicle accumulates relatively low mileage
- The business has a specific reason to own the asset outright
The right question is not simply, “Which option has the lowest payment?” The better question is, “Which option fits the way my business plans to use this vehicle?”
Businesses should also discuss the tax and accounting treatment of a lease or vehicle purchase with their qualified tax or accounting professional.
TRAC Leasing Works Best When It Is Part of a Plan
The real strength of TRAC leasing becomes easier to see when we stop looking at just one vehicle.
Imagine a company with 30 commercial vehicles.
The business may have:
- Five vehicles approaching replacement
- Three new employees starting next year
- Two older vans with increasing repair costs
- Several vehicles that need commercial upfits
- A large contract beginning in six months
At that point, the question is no longer simply:
“Should I lease this truck?”
The company needs a complete commercial vehicle strategy.
Fleet evaluation → Replacement forecasting → Factory ordering → Ford Commercial Line of Credit → TRAC leasing or financing → Upfitting → Delivery → Future replacement
When all of those pieces are considered together, the business can make better decisions about when and how to acquire vehicles.
Continue Learning About Commercial TRAC Leasing
Explore the rest of our TRAC Lease Learning Center for more detailed information about residual values, commercial upfits, lease-end options, CLOC and fleet planning.
Estimate a TRAC Lease Payment
See how vehicle price, lease term, residual value and rate assumptions can affect an estimated commercial lease payment.
Use our TRAC Lease Calculator to compare different scenarios while planning your next commercial vehicle.
TRAC Lease Benefits FAQs
What is the biggest benefit of a TRAC lease?
There is no single benefit that applies equally to every business. Common advantages include flexible residual structures, no mileage restrictions or penalties, the ability to include commercial upfits and the ability to incorporate leasing into a planned fleet replacement strategy.
Can a TRAC lease have a lower monthly payment than financing?
It can, depending on the structure. Because a residual value remains at lease-end, less of the vehicle’s total value may be accounted for through the scheduled lease payments. A lower payment should still be considered alongside the residual and lease-end obligation.
Does Ford CommerciaLease have mileage limits?
Ford states that CommerciaLease has no mileage restrictions or mileage penalties, which can be useful for commercial vehicles with changing or high annual mileage.
Can commercial upfits be included in a TRAC lease?
Ford states that eligible commercial upfits can be included in the total value and can be residualized under CommerciaLease, subject to applicable requirements and approval.
Can I trade a TRAC lease vehicle toward another vehicle?
A business can have the current vehicle appraised by the dealership when planning its replacement. The dealer can compare the vehicle’s market value with the applicable lease obligation so the business can decide whether trading the vehicle into the next commercial vehicle makes sense.
Can Ford Commercial Line of Credit be used with a TRAC lease?
Ford indicates that qualified businesses can use an approved Commercial Line of Credit with eligible commercial financing products including CommerciaLease, subject to current Ford Credit requirements.
Is a TRAC lease always better than financing?
No. Traditional financing may be a better choice for vehicles the business expects to own and operate for a long time. The decision should consider cash flow, mileage, vehicle use, upfits, expected ownership period and replacement strategy.
Could TRAC Leasing Make Sense for Your Fleet?
The best financing structure starts with understanding the vehicles your business actually operates and how you plan to use them.
I offer businesses a no-cost fleet needs evaluation where we can review your current vehicles, upcoming replacements, commercial upfits, expected growth and available financing or leasing options.
We can look at which vehicles may be better candidates for TRAC leasing, which may make more sense to finance, and how future factory orders can fit into your replacement schedule.
The goal is not simply to find the lowest payment.
The goal is to create a commercial vehicle plan that supports the way your business operates and grows.