TRAC Lease
Finance a diesel or natural-gas generator with a TRAC lease and control your residual at end of term. Lower payments, flexible end-of-term options.
The outage window does not care how you structure the financing. But your cash flow does. A Terminal Rental Adjustment Clause lease, known as a TRAC lease, is built specifically to lower the monthly payment on mobile, towable, and over-the-road power equipment by locking in a residual value up front. You pay on the depreciation during the term, not on the full equipment cost, and the residual sits on the back end as a balloon you can pay, refinance, or walk away from.
TRAC leases were designed for over-the-road trucks and trailers, and the IRS blessing that created them (Revenue Ruling 55-540 and the Tax Reform Act of 1986) still applies cleanly to towable and mobile gensets. A towable generator riding on a trailer qualifies. A trailer-mounted generator set qualifies. Stationary permanently installed generators typically fall outside the TRAC lane, but there are adjacent structures that accomplish the same payment-lowering goal for fixed installs. If your unit is mobile, the TRAC lease is worth a hard look before you commit to a structure.
How a TRAC Lease Is Structured
At the beginning of the transaction, the lender and the lessee agree on a Terminal Rental Adjustment Clause: a residual dollar amount the equipment is projected to be worth at end of term. That number might be 15 percent of original cost for a 60-month term on a well-maintained towable diesel, or higher or lower depending on the make, the model, the hours expected, and the residual projections in the secondary market. The monthly payment is calculated on the difference between the purchase price and that residual, plus the cost of money across the term.
At the end of the lease you have three paths. One: pay the residual and take the title, functionally the same end point as a $1 buyout lease but you knew the payoff number from day one. Two: refinance the residual into a short-term loan and keep the equipment in service. Three: sell the equipment, apply the sale proceeds to the residual, and settle the difference. If the machine brings more than the residual at sale, you pocket the upside. If it brings less, you cover the gap. That is the adjustment in Terminal Rental Adjustment Clause.
Because you bear the residual risk, the IRS does not treat the TRAC lease as a conditional sale, and the payments are deductible as operating expenses during the term rather than capitalized. That is a meaningful difference for operators who want to keep the asset off the balance sheet and the payment running through the P&L as rent.
New Equipment vs. Used Equipment on a TRAC
New towable and trailer-mounted generators from manufacturers like Atlas Copco, Doosan, and Multiquip have well-established resale markets. Lenders who write TRAC leases know the book value trajectory on a Atlas Copco QAS series or a Multiquip DCA series and can set a defensible residual. That confidence translates into an approved structure with a residual that is fair to both sides.
Used generators are more nuanced. A 10-year-old unit with documented service history and load-bank test results has a knowable value. An older unit without records is harder to set a residual on because the lender is bearing the depreciation uncertainty. TRAC leases on used equipment are doable, but the residual will be set more conservatively, which narrows the payment advantage over a straight-purchase loan. For used equipment, sometimes used equipment financing through a term loan with a $1 buyout is the cleaner path.
Who the TRAC Lease Fits
Contractors who deploy mobile power to multiple job sites and expect the equipment to rotate or be upgraded in four to six years are ideal TRAC candidates. The lower monthly payment preserves cash flow while the unit is working, and the end-of-term optionality lets you sell the aging machine, apply the proceeds to the residual, and cycle into a newer unit without a large lump sum out of pocket.
Events and entertainment production companies running towable generator fleets for outdoor concerts, festivals, and film locations use TRAC leases routinely because their equipment is genuinely mobile and they operate on margins where the lower monthly matters. The same logic applies to construction firms that carry a towable genset as a tool, not a permanent facility asset.
Oilfield service operators in the Permian, Eagle Ford, and Bakken carry mobile power units on TRAC leases because basin activity cycles up and down. Owning the full cost of a fleet at peak demand and then carrying it through a trough is expensive. The TRAC lease lowers the payment during the trough and lets you make the residual decision when you know where basin activity is heading.
Credit and Documentation
We fund TRAC leases from $50,000, application-only up to roughly $400,000. Under that ceiling: three months of business bank statements, a signed credit application, and basic information on the equipment (make, model, year, serial if available). Over $400,000 we typically need two years of business tax returns and sometimes a balance sheet. Most mobile generator purchases fall comfortably in the application-only range.
B and C credit is workable. We have funded TRAC leases for operators with prior defaults, open tax liens, and thin business credit histories. The structure that approves depends heavily on the business bank statements showing consistent cash flow, so six to twelve months of clean statements do more work than a pristine credit score on a thin file. Down payment can help a borderline file across the line; 10 to 20 percent down is the typical ask when credit needs a boost.
Timeline from application to funding is one to two weeks in most cases. If you have the equipment located and a price agreed, getting a TRAC lease closed in five to seven business days is realistic on a clean file.
Questions About TRAC Lease
Straight answers before you send the generator file.
Can I use a TRAC lease on a stationary standby generator installed at a building?
TRAC leases were designed for over-the-road and mobile equipment. A permanently installed standby generator affixed to a concrete pad is generally outside the TRAC structure. For stationary installs, a capital lease with a $1 buyout or a standard equipment loan accomplishes the same ownership goal. We can walk you through which structure fits your specific equipment and site.
What happens if the generator is worth less than the residual when the lease ends?
That is the adjustment clause in action. If you sell the equipment and the sale proceeds fall short of the agreed residual, you cover the gap. If you plan to keep the equipment, you pay the residual and take title. If the machine has been well maintained and the market holds, the gap is typically small. The risk is real, which is why TRAC leases price slightly better than $1 buyout leases on the monthly payment.
Are TRAC lease payments tax-deductible as operating expenses?
Because the IRS does not treat a properly structured TRAC lease as a conditional sale, the payments are generally deductible as rent or operating lease expense during the term. You do not capitalize the asset. Confirm with your tax advisor since the specifics depend on your business structure and how the IRS would characterize the arrangement.
Can I refinance the residual at end of term instead of paying it in cash?
Yes, and it is common. If the equipment is still earning and you want to keep it, we can structure a short-term balloon loan to pay off the TRAC residual and put you on a conventional payment schedule to reach full ownership. That path is particularly useful when end-of-term cash flow is tight but the equipment has another five years of productive life.
Price the TRAC Lease File
Send the generator quote, make and model, kW rating, seller, and delivery timing. We will review the package and return the next financing step.