A contractor financing a CAT 320 excavator eventually has to answer a question that has nothing to do with the sticker price: at the end of the term, who owns the residual risk on the machine? A loan answers that question one way. Among leases, a $1 buyout lease, a TRAC lease, and a fair market value (FMV) lease each answer it differently, and the right pick depends less on the monthly structure and more on what you actually plan to do with the excavator once the term ends.

Three Different Answers to the Same Question

A $1 buyout lease is built to end in ownership. You're effectively financing the full cost of the CAT 320 over the term, structured as a lease for accounting or cash-flow reasons, and at the end you pay a nominal $1 to take title. Economically it behaves a lot like a loan.

A TRAC lease (Terminal Rental Adjustment Clause) sets an estimated residual value at signing, and the two sides true up against that estimate at the end of the term. If the excavator is worth more than projected when it's sold or returned, you may see a credit; if it's worth less, you owe the difference. The risk on where used-excavator values land in two, three, or five years sits with you, not the lessor.

An FMV lease sets lower monthly payments by betting that someone else, the lessor, will absorb the resale risk. At the end of the term you have real options: walk away and hand the machine back, buy it at its actual fair market value at that point, or roll into a new lease on a newer model. You're not committed to owning this specific excavator at all.

Why the Choice Looks Different on an Excavator Than a Truck

Excavator values don't move the way truck values do. A well-maintained mid-size excavator like the 320 tends to hold its value more predictably than a truck racking up mileage, which changes the residual-risk math on both the TRAC and the FMV side. A lessor pricing an FMV lease on an excavator is often working with a more stable depreciation curve than one pricing a truck lease, which can translate into a more favorable residual estimate for you. That doesn't make FMV automatically the right call; it just means the comparison isn't a straight copy of how these structures play out on rolling stock.

When a $1 Buyout Fits

This is the right structure for a contractor who already knows the 320 is a long-term fleet fixture, something that's going to dig for eight, ten, or more years and get run into the ground rather than traded at the first opportunity. If you're not planning to walk away from the machine at any point, there's no reason to pay for the optionality that a TRAC or FMV lease is pricing in.

When a TRAC Lease Fits

A TRAC lease tends to suit a contractor who wants to end up owning the excavator, or trading it in on a predictable schedule, but wants the specific accounting and cash-flow treatment a lease offers over a straight loan. You're taking on the residual risk either way, so this only makes sense when you're comfortable with where used mid-size excavator values are likely to land, and have a realistic read on how hard this particular machine's duty cycle will run it down.

When an FMV Lease Fits

This is the structure for a contractor who wants to stay current, trading into a newer excavator every few years as technology, emissions standards, or warranty coverage change, without betting the business on guessing the resale market correctly. It costs something: generally a higher all-in cost than ownership if you do eventually buy out the machine at the end, since you're paying the lessor to carry the resale risk for you.

Questions Worth Asking Before You Pick a Structure

• Do you expect to run this specific 320 for its full useful life, or trade it within a few years?

• How comfortable are you estimating what a mid-size excavator like this one will be worth in three to five years?

• Does your business value the balance-sheet or cash-flow treatment a lease offers over a straight loan?

• What does the end-of-term true-up or buyout actually cost under each structure, in writing, not just the payment estimate?

If a personal guarantee is part of the conversation on any of these structures, our guide to co-signers and personal guarantees on excavator financing walks through what that actually means, and if your utilization is still ramping on a new excavator, our step-up payment structure guide for the Hyundai HX260L covers a different way to ease into full payments.

Why This Is Worth Working Through With an Independent Lender

A captive finance arm tied to one manufacturer's dealer network often pushes a standard lease template toward whichever structure moves machines fastest for that brand, not necessarily the one that fits your plan for the 320 specifically. An independent lender like BFC can walk through all three structures side by side, and the actual end-of-term numbers, rather than defaulting to one. Our Financial Center outlines the range of structures we offer, and our excavator financing page goes deeper on what we look at for an excavator-specific deal.

Rent-vs-Own Still Comes Before This Decision

All three of these structures assume you've already decided owning, or at least controlling, an excavator over the next several years beats renting one job by job. A contractor with only occasional, unpredictable excavation needs may be better off renting outright and skipping this decision entirely. A contractor with steady, recurring excavation work across multiple projects is the one actually weighing a $1 buyout against a TRAC lease against an FMV lease in the first place.

Who Actually Faces This Decision

This comes up most for a site-development contractor standing up a long-term excavation fleet, a utility contractor financing an excavator for recurring trenching and installation work, and a demolition contractor who needs the machine on every job but isn't sure yet whether this exact model will still fit the fleet in five years. All three are weighing the same tradeoff: commit to this machine, or buy flexibility.

Business Entity Structure Changes How Lenders Weigh the Residual Bet

A newer single-member LLC asking for a TRAC lease is asking a lender to extend residual-risk-sharing credit to a thinner track record, which can mean a more conservative residual estimate at signing than an established contractor with years of resale history would get on the same CAT 320. Entity structure and time in business affect the terms available under all three structures, not just the loan-versus-lease decision most contractors think about first.

Used Excavators Can Use Any of These Structures Too

None of these three structures is limited to new equipment. A used 320 can be financed under a $1 buyout, a TRAC lease, or an FMV lease just as easily as a new one, though the residual estimates on a TRAC or FMV lease will reflect the machine's age and remaining useful life rather than a new-equipment depreciation curve. Ask your lender how a used-equipment deal changes the numbers under each structure before assuming they scale the same way.

Bundled Attachments Follow Whichever Structure You Pick

A hydraulic thumb, a hammer, or a set of buckets financed alongside the 320 gets folded into whichever structure you choose, and the residual estimate on a TRAC or FMV lease needs to account for the attachments' value too, not just the base machine. Confirm that any lease quote you're comparing reflects the full bundle.

What Happens If You Guess Wrong on a TRAC Lease

The real risk on a TRAC lease shows up at the end of the term, not during it. If mid-size excavator values soften more than expected by the time your term ends, you owe the shortfall between the estimated and actual residual, on top of everything else you've already paid. This is the tradeoff for the lease's typically lower monthly payment relative to a $1 buyout, and it's worth planning for honestly rather than assuming the first estimate will hold.

How Captive Lenders Typically Steer This Decision

A manufacturer's captive finance arm has its own interest in which structure you pick, since an FMV lease that ends with you trading into a newer machine from the same brand keeps you inside that manufacturer's dealer network for the next cycle too. That's not necessarily bad for you, but it means the recommendation you get from a captive lender isn't always built purely around your plan for the 320; it's also built around keeping you as a repeat customer for that brand specifically. An independent lender has no stake in which manufacturer you buy from next, which tends to produce a more neutral read on which structure actually fits your situation.

A Personal Guarantee Applies the Same Way Across All Three Structures

Whether you finance the 320 under a $1 buyout, a TRAC lease, or an FMV lease, a personal guarantee requirement is driven by the same underlying factors: your business's credit profile, time in business, and entity structure, not by which lease structure you choose. What does change across the three is your exposure at various points in the term, since a TRAC lease's true-up obligation and an FMV lease's early-termination cost can both land on a guarantor differently than a straightforward loan balance would. Ask your lender to walk through what a guarantor is actually on the hook for under each structure, not just the monthly payment.

The Bottom Line

A $1 buyout lease, a TRAC lease, and an FMV lease all put the same CAT 320 to work, but they make very different bets about who owns the resale risk and what you'll do with the machine when the term ends. Walk through your actual plan for this excavator, not just the monthly structure, before picking one.

Ready to find out which lease structure, or a straight loan, actually fits your next excavator purchase, good credit or bad, startup or established? Apply with BFC today. Visit our homepage to see how we work, browse our equipment for sale listings if you're still shopping, or subscribe to our blog for more financing strategy content like this.