Leasing and finance
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.
Why it matters
Residual value affects lease pricing and resale plans. A lessor with a high residual estimate can charge lower payments. An operator that buys a fleet may use it when it plans for sale or replacement. Container condition drives the number, so repairs, dents and floor wear matter. A common mistake is to treat residual value as a guarantee. It is an estimate, and the real market may pay more or less. Some leases include a buyout price set at the start. Operators should ask how a lessor sets it and who bears the risk if value falls.
Read: How to price a container rental fleet
Definition source: excedr.com
Related terms
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.
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.
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.
refurbished container
A refurbished container is a used container that has been repaired and cosmetically restored, usually with surface preparation and new paint. It is not structurally changed. Sellers often start with a unit that meets the wind and water tight category. The term is a trade term and has no single standard.
container survey
A container survey is a formal inspection of a container by a qualified surveyor, with a written result. Surveys check that a container meets safety standards, such as the CSC, before shipping. They can also support valuation and damage assessment. Costs vary by provider.
For the industry
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