Leasing and finance
depreciation
Depreciation is an annual income tax deduction that lets a business recover the cost of property over the time it uses the property. The IRS describes it as an allowance for wear and tear, deterioration or obsolescence. Containers, trailers and trucks used in a business are common examples.
Why it matters
A portable storage company that buys a container fleet spreads the cost over several years instead of deducting it at once, unless a special rule allows faster write-offs. The IRS explains the methods and limits in Publication 946. A common mistake is to confuse tax depreciation with real market value. A well-kept container can keep resale value after it is fully depreciated on paper. Book depreciation, used for financial statements, can also differ from tax depreciation. Operators should work with a tax professional. This is general information, not tax advice.
Read: How to price a container rental fleet
Definition source: irs.gov
Related terms
residual value
Residual value is an estimate of what an asset will be worth at a future point, often near the end of a lease or its useful life. Excedr says it depends on condition, age, demand, service history, obsolescence, removal costs and the terms of the agreement.
finance lease
A finance lease is a lease that works much like financing the purchase of an asset. W. P. Carey explains that leases are classified as finance when they have characteristics similar to financing a purchase. Under U.S. GAAP the lessee usually records the asset and a liability on its balance sheet.
operating lease
An operating lease is a lease where the lessor lets the lessee use an asset for a set period, much like a typical rental. W. P. Carey describes it as a more traditional lease arrangement. It is the type of lease that does not meet the tests for a finance lease.
utilization rate
A utilization rate is the share of time that rental assets earn money. InTempo Software defines time utilization as how often assets are rented out. It is calculated as days on rent divided by days available. For example, 25,000 rented days out of 36,500 gives 68.5 percent.
used container
A used container is a container that has served a working life, usually at sea, before being sold or rented for storage. Sellers grade used units, often as cargo worthy, wind and water tight or as-is. The grade affects price, appearance and how well the unit keeps out water.
tare weight
Tare weight is the weight of an empty container or vehicle. Subtract it from the gross weight to find the weight of the goods inside. On a shipping container, it is not set by the ISO standards. It depends on how the container was built.
For the industry
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