What is Scrap Value?
The Short Answer
Scrap Value explained simply
Scrap value is what you get for an asset if you take it apart and sell its pieces. Think of an old car. Its scrap value is the money you get for selling its metal, tires, and other parts separately. This is usually much less than what the car would be worth if it was still running and drivable. It’s the bare minimum value an asset has.
Real-World Example
The Old Machine Example
Imagine a factory owns a large, outdated machine. It no longer works efficiently, and repairing it would cost too much. The factory decides to sell it for scrap. They get \$500 for the metal, \$50 for the wires, and \$20 for other small parts. The total scrap value is \$570. This is far less than the \$10,000 it cost new, or even the \$2,000 it might have been worth if it was still working.
Why this matters
Knowing an asset’s scrap value helps you understand its lowest possible worth. This is important for accounting, insurance, and deciding whether to repair, replace, or dispose of old equipment. It sets a floor for an asset’s value.
Always consider scrap value when evaluating old or broken assets. It helps you avoid overvaluing something that has reached the end of its useful life. It also gives you a baseline for negotiation.
Always consider scrap value when evaluating old or broken assets. It helps you avoid overvaluing something that has reached the end of its useful life. It also gives you a baseline for negotiation.
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