Residual Value

Residual value is the projected market value of a leased vehicle at the end of the lease term, determined by the leasing company at the start of the contract. It plays a critical role in calculating lease payments, as the lessee only pays for the portion of the vehicle’s value that is expected to depreciate during the lease period.

Residual value is expressed as a percentage of the car’s MSRP (manufacturer’s suggested retail price). Higher residual values generally result in lower monthly lease payments, as the vehicle is expected to retain more of its value.

Residual values are influenced by vehicle brand, model, market demand, expected reliability, and overall resale strength. For example, vehicles from brands known for durability often have higher residual values, making them attractive lease options.

At lease-end, the residual value also serves as the purchase price if the lessee chooses to buy the vehicle. Understanding residual value helps consumers compare leasing deals and determine whether purchasing the vehicle at the end of the lease is financially sound.

Lessees benefit from higher residual values through lower payments and better options at lease maturity.