John Deere Skid Steer Leasing: $1 Buyout, FMV, or TRAC Lease — Which Structure Fits Your Crew

Oct 5

6 min read

Contractors shopping a John Deere skid steer or compact track loader -- the G-Series and P-Tier lineup covering everything from the 318G up through the larger 332G and P-Tier models -- eventually run into a decision that gets far less attention than the loan-versus-lease conversation generally does: once you've decided to lease rather than buy outright, which lease structure actually fits your situation. A $1 buyout lease, a fair-market-value lease, and a TRAC lease all technically fall under the umbrella of "leasing," but they work differently enough in practice that treating them as interchangeable is a mistake many contractors only discover after signing. Walking through how each structure actually works, using a John Deere skid steer as the concrete example, makes the differences much easier to see than a purely abstract explanation would.

Why Lease Structure Matters as Much as the Loan-vs-Lease Decision Itself

Most financing guidance stops at "loan or lease" as if that's the end of the decision tree, but for a contractor who's already decided leasing fits their situation -- maybe they cycle through newer skid steers every few years, maybe they want to preserve credit capacity for other equipment -- the next decision is just as consequential: what happens at the end of the lease term, and how much flexibility or certainty does the structure actually provide along the way. Getting this wrong doesn't usually blow up the deal; it just means the contractor ends up with a structure that doesn't match how they actually intended to use and eventually dispose of the machine.

The $1 Buyout Lease: Ownership Disguised as a Lease

A $1 buyout lease functions almost identically to a loan in its ultimate outcome: the contractor makes payments throughout the term, and at the end, ownership transfers for a nominal $1 payment. The lease structure during the term can sometimes offer a different qualifying profile or payment structure than a straight loan, but the end result is the same certainty a loan provides -- the contractor knows from day one they'll own the skid steer outright when the term ends. For a contractor who's confident they want to keep a specific John Deere skid steer for its full working life, and who was drawn to a lease structure mainly for qualifying or cash-flow reasons rather than a genuine desire for end-of-term flexibility, a $1 buyout often ends up being the simplest, most predictable choice.

The Fair-Market-Value Lease: Flexibility With an Unknown Final Number

A fair-market-value, or FMV, lease gives the contractor real optionality at the end of the term: return the skid steer, renew the lease, or buy it out at whatever its appraised fair market value turns out to be when the term ends. That optionality is genuinely valuable for a contractor who wants to stay current with newer John Deere models as they're released, or who simply doesn't want to commit today to owning this specific machine three or four years from now. The tradeoff is that the buyout price isn't fixed in advance -- it depends on the skid steer's actual condition, hours, and the used-equipment market for that model when the lease ends, which means the contractor is making a planning decision today without knowing exactly what that final number will be.

The TRAC Lease: A Middle Structure Worth Understanding

A TRAC lease -- terminal rental adjustment clause -- sits between the two: it sets an estimated residual value for the skid steer upfront, but true-ups that estimate against the equipment's actual market value when the lease ends, with the difference adjusting the final payment up or down. This gives a contractor more predictability than a pure FMV lease, since there's a stated residual figure from the outset, while still tying the final outcome to real market conditions rather than fixing it completely in advance the way a $1 buyout does. TRAC leases are more common in vehicle and some equipment financing than in every corner of construction equipment leasing, so it's worth confirming directly with a lender whether this structure is available for the specific John Deere model in question.

Matching the Lease Structure to How You'll Actually Use the Machine

The right structure comes down to a fairly simple self-assessment: how confident are you, today, that you'll want to own this exact skid steer when the lease ends, and how much do you value certainty about the final number versus flexibility to walk away or renegotiate based on actual market conditions at that time. A contractor running a John Deere 318G on daily landscaping or small-site work who expects to keep running that same machine for years is generally better served by the certainty of a $1 buyout. A contractor who upgrades equipment aggressively to stay current with the latest technology, or who genuinely isn't sure yet whether they'll want to keep this specific machine, benefits more from the optionality an FMV or TRAC structure provides -- even with the tradeoff of not knowing the exact final number today.

A Worked Comparison

Illustrative example, not an actual client: a landscaping contractor is deciding how to lease a John Deere skid steer they plan to put to consistent daily use. They're confident this size and type of machine fits their business for the foreseeable future, with no particular pull toward upgrading every few years. Given that certainty, they choose a $1 buyout lease -- locking in ownership at the end without worrying about an FMV appraisal or a TRAC true-up. A different contractor in the same scenario, who's expanding quickly and expects their equipment needs to shift as the business grows, might reasonably choose an FMV lease instead specifically to preserve the option of returning the machine rather than being locked into ownership of equipment that may no longer fit the business in three years.

How This Connects to the Broader Loan-vs-Lease Decision

This lease-structure decision sits one layer beneath the broader loan-versus-lease question we cover in our guide to choosing between an equipment loan and lease. That broader guide helps settle whether leasing makes sense at all for a given piece of equipment; this one picks up from there to help settle which specific lease structure fits once leasing is the chosen path. Reading both together gives a more complete picture than either does alone, especially for a contractor evaluating a specific John Deere model where both decisions are genuinely in play.

Questions Worth Asking Your Lender Directly

Which lease structures -- $1 buyout, FMV, TRAC -- are actually available for this specific John Deere skid steer model and this business's credit profile?
If it's an FMV lease, how is the end-of-term value actually determined, and by whom?
What are the equipment return condition standards if the lease ends in a return rather than a buyout?
Can the lease structure be changed or renegotiated mid-term if the business's plans shift?
How does each structure compare on monthly payment, not just at signing but across the full term?

Mid-Term Changes: What Happens If Your Plans Shift

Business plans change, and a contractor who chose a $1 buyout lease expecting to keep a John Deere skid steer for years might later decide to upgrade sooner than planned, just as a contractor on an FMV lease who assumed they'd want flexibility might end up wanting to simply buy the machine they already have. Most lease agreements allow some flexibility to buy out early or restructure, but the terms for doing so -- and any cost associated with it -- are set by the specific agreement and vary considerably by lender and lease type. This is worth asking about explicitly before signing rather than assuming flexibility exists by default, since a structure chosen for its simplicity today can become a constraint if the business's direction shifts meaningfully before the term ends.

A good practice for any contractor signing a multi-year lease on a John Deere skid steer, regardless of which structure is chosen, is revisiting the equipment plan annually rather than only thinking about it at signing and again at the end of the term. A business that's grown or changed direction partway through a lease is often better served having that conversation with their lender proactively, rather than waiting until the scheduled end-of-term decision point to address a mismatch that's been building for a while.

If you're newer to equipment financing generally, our guide to how equipment lenders qualify applicants is a useful starting point before working through lease-structure specifics.

The Bottom Line

A $1 buyout, an FMV lease, and a TRAC lease all fall under "leasing," but they produce genuinely different outcomes and should be chosen deliberately based on how confident a contractor is about keeping a specific John Deere skid steer long-term versus wanting flexibility to walk away or renegotiate. Understanding these structures before signing, rather than discovering the differences only when the lease term ends, leads to a far better match between the financing and how the equipment actually gets used. Our small business equipment financing page has more on how we structure both loans and leases across equipment types.