Buy-Back Guarantee

Buy-Back Guarantee

Residual Value Insurance guarantees the owner of leased personal property (e,g, auto vehicle or equipment) a particular value on a specified date, usually the termination of the lease.


It covers the difference between the actual liquidated value of property returned to the insured lessor and the expected value of the property specified in the policy.


Assets which have a known secondary market and historically hold their value can be considered for cover.


Examples include Aircraft, Vessels, Heavy Plant & Equipment (Yellow Metal).


A full market appraisal of the asset class is likely to be required.


It is possible to offer this protection in combination with a client specific buy-back guarantee campaigm.

Advantages of Buy-Back Guarantee Coverage

Whilst each client campaign is likely to be unique there are several advantages:


  • could provide the insured (in the main the Lessor) greater flexibility in the structure of their lease contracts with the Lessee (their clients), particularly where they involve balloon payments; and


  • enabling the Lessee to return the unit without penalty if they decided not to take ownership or to provide a more favourable lease rental agreement; and


  • whilst subject to territory specific accounting rules and regulations, it is possible the insured may be able to treat the cost of the insurance as a business expense; and


  • coverage where it encouraged the design of more lease contracts without penalty to the lessee, in turn may encourage such clients to the use of key working assets to their business without the need for humpy cash outlays and the consequent working cash flow strain on their businesses.
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