Shawn Halladay Points to New Accounting Rules, Tax Reform Proposals

Shawn D. Halladay, The Alta Group’s Managing Director of Professional Development, spoke at the American Fleet Leasing Association (AFLA) recently about the benefits of TRAC leases, how they compare to other fleet financing products and what’s on the horizon.

At the Las Vegas event on Sept. 18 his topic was “Deconstructing the Lease, ” providing an in-depth look at Terminal Rental Adjustment Clause (TRAC) leases from economic, accounting and tax perspectives, including the effect of new lease accounting rules. TRAC leases are popularly used in fleet leasing because of the frequent turnover of assets, consistent residual performance and the means of treating a transaction as an operating lease. Halladay further described variations in this lease type.

Potential ramifications of tax reform were outlined—including the potential effect on end-user lease-versus-buy decisions with such proposed changes as:

    • 100 percent immediate write off
    • Decreased tax rates
    • Net interest deduction

He recently published a two-part blog series on Equipment Finance Advisor about tax reform’s likely impact based on current considerations in Washington, D.C.

Balance sheet Payment Total interest Net present value
Loan 100% 2.29% 10.08 96.33%
Capital lease 90% + 2.09% 12.42 87.87%
Operating lease 0% 1.57% 15.43 66.01%
TRAC lease 0-100% 1.52% 15.76 63.67%

 

For a comparison of financing alternatives as presented to the AFLA, see the chart above. Various types of TRAC leases were described, including a managed services solution.  Download in SlideShare.

AFLA’s networking and professional development event was tailored to the fleet industry under the conference theme, “Your Winning Hand: Align, Advance, Accelerate, Achieve.”

Halladay has three decades of experience as a lessor, trainer, consultant and auditor to Alta’s clients. His professional expertise is global and spans leasing industry sectors. He is a frequent speaker and publisher in the equipment leasing and finance industry. Email: shalladay@thealtagroup.com.