A critical and often difficult task of IT management is the analysis and calculation of residual values. There are no magic formulas or short-cuts and there are many variables that can affect the ultimate forecast for IT equipment or other types of machinery. One of the key elements in accurately forecasting residual values is having a thorough understanding of the current market demand for similar or like equipment.
Computer Economics is one of the leading authorities on the IT secondary (used) equipment market. Our research and analysis on the secondary market provides the foundation for our residual value forecasting model. In addition to our secondary market research, we analyze other key factors such as new enhancements and upgrades, introduction of new and improved models, new chip technologies, initial cost, maintenance, population, age, method of sale, and other changes in technology. All of these factors are analyzed and applied to each and every residual value forecast we publish.
Our residual values database includes the following categories of equipment:
Material Handling Equipment (Forklifts)
Miscellaneous (Manufacturing Machinery, NC machines, etc.)
A sample residual value forecast is shown in the screen shot below:
In addition to the RVF Detail Report shown above, there are two other RVF reports available: a summary report and an index report, as described below.
Residual Value Report Summary
The Summary Report condenses the terms of the equipment into an easy format for review of the decline rates for the manufacturer and model of equipment listed. It also indicates the “Manufacturer List Price,” the “Original Equipment Cost,” and the discount offered by the manufacturer. The Detail Report (shown in the screen shot above) can then be reviewd for further detail of the actual specifications of the equipment.
Residual Value Report Index
The Index report summarizes the equipment in each section of the report, listing the machine, model number, description, and original equipment cost of each type of equipment forecasted. Again, consult the Detail Report (shown in the screen shot above) for further detail on each specific piece of equipment.
Treatment of "Soft" Costs
All of the equipment listed in our residual value reports are actual lease transactions collected from various sources. The report will only include forecasts made during the last 12 months. Many of these lease transactions include an allocation for soft costs, costs that will not or cannot be transferred to the next user. These soft costs may include items such as: software, installation costs, freight, maintenance costs and professional services, which need to be recovered over the lease term.
Our residual value report format takes into account these soft costs when forecasting the residual for the equipment to be leased. If only the equipment is to be leased, then the top part of the report should be used to determine the residual value. If you are going to include soft costs into your lease payment, then the forecasted residual on the top part of the forecast will be reduced to the forecasted residual on the bottom part of the forecast. This difference will recover the soft costs over the term of the lease.
For more information on our Residual Value Forecasts, or to receive information on a Computer Economics subscription with full access to this information on an on-going basis, please CONTACT US.