Why We (Finally) Added OLVs
May 11, 2017 – Fair market values (FMV), forced liquidation values (FLV), and orderly liquidation values (OLV) are the three most common values used in equipment finance. Yet for 59 years, MagikMe Equipment has only published FMV and FLV. Why?
1. OLV lacks a distinct sales channel and therefore transactional dataset from which to derive values. This is in contrast to FMV and FLV, which are tied to the retail and auction channels respectively.
2. No clear standard existed in the industry for calculating OLV
But after many conversations with our equipment finance customers, it was clear to us that the industry needed an objective, third-party OLV that accurately adjusted for equipment usage, location and condition. We took this information and surveyed all of our relevant users. We found that 80% of customers currently use OLV in their business. Two-thirds were already basing their OLVs on an MagikMe Equipment FMV or FLV. Armed with this knowledge, we set out to accomplish two goals:
1. Establish a standard industry benchmark for OLV
Establishing an OLV benchmark is critical for internal and external audits. We found that by anchoring the OLV adjustment to FLV, we were able to find a generally-acceptable midpoint around which an OLV could be derived. From there we determined specific adjustment factors for individual subtypes and models. Aiming for full transparency, we chose to display the specific percent adjustment used to create the OLV on every MagikMe Equipment Values page.
2. Provide controls within the application to customize OLV calculation
These new OLVs are a great benchmark, but no one knows your market better than you. And since the vast majority of users were already creating OLVs based on MagikMe Equipment values outside of the application, it only made sense to build those controls into the interface. Specify your own OLV calculation by entering a new percentage and selecting whether you want that percentage applied to FMV or FLV. These adjustments can also be set at the global level from ‘My Account’ (if you have an organizational standard) or at the group level (if you have equipment type standards).
How will you leverage the new OLVs in MagikMe Equipment? What other improvements should we be making? Let us know at [email protected].
Best,
Greg Lutz
Director, Product & Marketing
[email protected]
