When it comes to manageing a material handling fleet, understanding how your forklifts lose value over time isn’t just good accounting – it’s smart business. Knowing how to calculate depreciation and estimate used forklift residual value allows you to plan replacements, control costs, and get the best return when selling or trading in your equipment.
Our guide explains what residual value means, how forklift depreciation works, and how to estimate what your machine is truly worth at resale.
What Is Residual Value?
Residual value refers to the estimated worth of your forklift at the end of its useful life or after a set period of use. It represents how much value remains after accounting for depreciation. In other words, what you can expect to recover if you sell or trade in your equipment.
Understanding this figure helps you forecast replacement cycles, calculate ownership costs, and make informed purchasing decisions. A higher residual value means you’ll recover more of your original investment when it’s time to upgrade.
How Forklift Depreciation Works
Depreciation is the gradual reduction in your forklift’s value as it ages, racks up operating hours, and experiences wear and tear. Most forklifts depreciate most rapidly in their first few years, then level off as they approach mid-life.
While every machine is different, a general rule of thumb looks like this:
- Year 1: 15–20% value loss
- Years 2–5: Around 10–15% value loss per year
- After Year 5: Depreciation slows, depending on condition and maintenance
Fuel type also plays a role. Electric forklifts often retain value longer due to their lower operating costs and growing popularity in warehouse environments, while diesel forklifts are valued for their power and durability in outdoor applications.
Depreciation Calculation Methods
There are two main approaches businesses use to calculate forklift depreciation:
1. Straight-Line Depreciation
This method spreads the loss evenly over the forklift’s expected lifespan. It’s simple, predictable, and widely used for financial planning.
Formula:
(Cost – Residual Value) ÷ Useful Life = Annual Depreciation
Example:
If you purchased a forklift for £25,000, expect it to last 10 years, and estimate a residual value of £5,000, the annual depreciation would be:
(£25,000 – £5,000) ÷ 10 = £2,000 per year
2. Accelerated Depreciation
This method accounts for the fact that forklifts lose value faster when they’re new and heavily used. It’s commonly used for tax purposes and when early equipment wear is expected.
Accelerated depreciation results in higher value loss in the first few years, then slower depreciation later, giving a more realistic picture for machines that work long hours early in their life. Your accountant can advise which method best fits your financial strategy and compliance requirements.
Estimating Your Forklift’s Residual Value
To estimate your forklift’s current or future resale value, follow these steps:
- Start with the original purchase price. This sets the baseline for calculation.
- Deduct accumulated depreciation. Apply the depreciation rate (straight-line or accelerated) based on the forklift’s age and hours.
- Adjust for real-world factors. Consider maintenance history, overall condition, and market demand. A forklift that’s been serviced regularly and kept in good working order will fetch more than one that’s been overused or neglected.
For instance, if your five-year-old forklift originally cost £25,000 and depreciates at 12% per year, it’s now worth roughly £12,500 before adjusting for condition or hours. Add value for excellent maintenance or fewer hours, or subtract for excessive wear and needed repairs.
Key Factors That Influence Depreciation and Value
While depreciation formulas provide a baseline, several external factors influence a forklift’s actual resale value:
- Operating hours – The fewer, the better. Machines under 10,000 hours typically hold value longer.
- Service and maintenance records – Complete, well-documented servicing slows depreciation and boosts buyer confidence.
- Tyre, battery, and mast condition – These are major cost items buyers consider carefully.
- Fuel type – Electric models increasingly outperform diesel and LPG forklifts in residual value.
- Brand reputation – Established manufacturers like Linde, Hyundai, and Combilift tend to retain value better due to reliability and parts availability.
- Market demand – Economic trends in logistics, warehousing, and construction can push used prices up or down.
Understanding these influences allows you to refine your depreciation estimates and plan equipment turnover at the most profitable time.
Using Residual Value in Fleet Planning
Residual value isn’t just an accounting figure – it’s a decision-making tool. By forecasting what your forklifts will be worth in three, five, or ten years, you can:
- Schedule replacements before major repairs become uneconomical.
- Time sales or trade-ins to maximise return.
- Build more accurate cost-per-hour or cost-per-shift models.
- Justify refurbishment or resale investments with data.
Fleet managers who actively track depreciation avoid unexpected financial losses and make their capital work harder across the equipment lifecycle.
Preserve and Maximise Your Forklift’s Value with TAG
While calculating residual value and depreciation helps you make smarter financial decisions, keeping your forklift in top condition is equally important. TAG Forklift Truck Services supports businesses with a full range of forklift solutions, including the sale of new and refurbished machines, trade-ins, servicing, and supply of parts, attachments, tyres, and accessories.
Regular maintenance and quality refurbishment from TAG help preserve your forklift’s operational performance and resale potential, ensuring your investment continues to deliver value throughout its working life.
Contact us to discuss your forklift needs, explore our range of equipment, or arrange service and support to keep your fleet running efficiently.