Finance and accounting
Residual Value
5.0 from 150 Google reviews. Serving Australian businesses since 2010.
What is Residual Value?
Residual value is the estimated worth of leased equipment at the end of the term, and it determines who carries the end of lease risk.
Residual value is the estimated worth of a leased asset at the end of the lease term.
Under a finance lease, the lessee may carry the residual value risk, which can mean a balloon payment or responsibility for disposal if the device market value falls below the contracted residual.
Under an operating lease, the structure used for most managed print arrangements, the lessor keeps the residual value risk and the lessee simply returns the device at the end with no exposure to its market value.
Understanding residual value helps a business compare finance lease proposals, which can look cheaper monthly but carry a residual obligation, against operating lease proposals where the monthly rate already includes that risk.
Confirm the residual value treatment in any lease document with your accountant or legal adviser.
In short
- The estimated end of term value of the equipment.
- On a finance lease the risk is often yours.
- On an operating lease the lessor keeps that risk.
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Frequently asked questions
Who carries the residual value risk on a printer lease?
It depends on the lease structure.
On a finance lease the residual value risk often sits with your business, which can mean a final balloon payment or disposal responsibility.
On an operating lease, the structure used for most managed print arrangements, the lessor keeps that risk and you simply return the device at the end.
Confirm the residual treatment in any lease document with your accountant.
Cyrus Dickie
Founder, Global Document Solutions
You deal with the founder directly, from first quote to ongoing support, since 2010.
Authored by Cyrus Dickie, Founder at Global Document Solutions. In the industry since 2010.
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Related terms
- Finance LeaseA finance lease is an agreement under which a business effectively finances the purchase of equipment and carries most of the risks of ownership.
- Operating LeaseAn operating lease lets a business use equipment such as a printer for a fixed term and return it at the end, without taking ownership.
- End of Lease BuyoutAn end of lease buyout is an industry option on some leases, a final payment transferring ownership of the device. Our agreements do not offer one.
- Lease TermA lease term is the fixed contract period, stated in months, during which you pay to use the equipment. Most business terms run 36 to 60 months.
- PPSRThe PPSR is the national register that records who has a financial claim over equipment, so a buyer can check whether a machine is already financed.
Enquired on Monday and had a printer installed by Friday. Fast, easy, and exactly what we needed.
We have been using Global Document Solutions for about eight years now and would not go anywhere else.