A TRAC lease is generally used for “over-the-road” or qualified motor vehicles and trailers.
Lessor and Lessee agree on the end of term value of the equipment, referred to as the equipment’s estimated-residual value or predicted fair market value.
At the end of the lease term the estimated residual value is compared to the actual fair market value, as determined by the sale to the lessee, to a third party, or by a registered appraiser.
If, at the end of the lease term, the actual residual value is less than the estimated residual value, the lessee will make up the difference. The opposite would apply if the actual residual value is greater than the estimated residual value, the lessee will receive the difference.