Open-ended Lease and TRAC Clause
When Patterson approached Merchants, they were using a leased fleet of over 1,300 vehicles on 50-month amortization periods, cycling every three years. This was not sustainable or financially beneficial to the company.
Merchants analyzed possible solutions, working closely with Patterson’s Director of Corporate Transportation. The solution was a re-amortization strategy, in which Patterson would increase the amortization period to 60 months on 60 of their vehicles. This provided the company with a one-time, upfront credit that reduced monthly rental payments for branch locations and provided cash flow relief.
Merchants was also able to provide Patterson with an open-ended lease with a terminal rental adjustment clause (TRAC). Within the TRAC clause, each vehicle’s book value was readjusted to optimize cash flow. Having worked with Merchants for many years, Patterson was confident that this was the best solution for their team.
As a result, Patterson got an influx of cash to reinvest in their business and is now able to deliver pet and dental equipment, technology, and services more efficiently to their clients. Merchants was able to provide a flexible term lease to maximize Patterson’s revenue stream. Since Merchants extended the payment terms, monthly payments were able to be reduced.