An Open End Lease can also be structured as a "finance lease" with a $1.00 buy out at lease end.  This type of lease is treated as a loan for tax purposes.   The Lessee takes the depreciation instead of writing off the payments as an operating expense.
   

Open End Leases don't have the penalties associated with other leases:

• NO Mileage Limits or Charges
• NO Body Damage Charges

So, what's a TRAC Lease?

   
A TRAC Lease is an Open End Lease but available only for vehicles and trailers used at least 50% of the time for business purposes.

The lease document must have a Terminal Rental Adjustment Clause to qualify as a TRAC Lease.

TRAC Leases are unique in that federal tax rules permit a cash rebate (Rental

Adjustment) back to the lessee at lease termination if turned in and sold by the lessor.

How TRAC Leases work: 
At the beginning of the lease a Residual Amount is mutually agreed upon.  The residual amount is one of the factors that determine monthly or periodic payments. In most cases the residual amount may also be the purchase price for the vehicle at lease end.  To qualify as a true tax lease the residual should be at least 10% of the amount financed.

At the end of a TRAC Lease there are options:

• Purchase the vehicle for the Residual Amount

• Trade in for a replacement vehicle and apply equity to the new vehicle

• Extend the lease by financing the Residual Amount

• Turn in the vehicle and be eligible for the cash rebate

Example of a TRAC Lease Cash Rebate at Lease End