Owner-operators get three very different offers for the same truck: a bank or equipment loan, a TRAC lease and a carrier lease-purchase. They can have similar monthly payments but wildly different total costs and risks. Here’s how they compare on a $150,000 tractor.
Side by side
| Equipment loan | TRAC lease (20% residual) | |
|---|---|---|
| Down payment | $22,500 | $0 |
| Rate / term | 9.5%, 60 months | 10%, 48 months |
| Monthly payment | $2,677.74 | $3,293.51 |
| Owed at the end | $0 | $30,000 |
| Total interest / finance charge | $33,164 | $38,088 |
| Who owns the truck | You, from day one (lender holds a lien) | The lessor, until you pay the residual |
The TRAC lease’s payment is lower because $30,000 is left for the end. You can model any residual with the balloon field in the truck loan calculator.
When a loan wins
- You plan to keep the truck 5+ years and run it past the payoff.
- You want Section 179 or bonus depreciation in year one.
- You want freedom to haul for anyone and modify the truck.
When a lease wins
- You want the lowest payment and a newer truck every 3–4 years.
- You have little cash for a down payment.
- You’d rather deduct the lease payments as an operating expense (operating leases).
Carrier lease-purchase programs
Lease-purchase programs from carriers need little or no credit or down payment, which makes them tempting for new drivers. But read the contract: weekly payments are deducted from your settlements, the carrier often controls your freight and rate per mile, and if you leave or the lease is terminated you may walk away with nothing despite years of payments. Ask what happens to your equity if the contract ends early, who pays for major repairs, and get the total of all payments in writing.
Documents for a lease vs a loan
Lessors ask for almost exactly the same documents as lenders: CDL and MVR, EIN and formation documents, authority or lease-on agreement, 3–6 months of bank statements, two years of tax returns, the truck’s purchase order and insurance naming the lessor. See the full checklist.
Frequently asked questions
What is a TRAC lease?
A Terminal Rental Adjustment Clause lease sets a residual value. At the end you can buy the truck for the residual, or it’s sold and you cover any shortfall or keep any surplus.
Is leasing a semi truck tax deductible?
Payments on a true operating lease are usually deductible as a business expense. With a loan you deduct the interest and depreciation instead. Ask your tax adviser which works better for you.
Is a $1 buyout lease really a lease?
For tax purposes it’s usually treated as a purchase, like a loan, because you’ll own the truck at the end.
