1. What is Residual Value in Car Leasing?

The residual value is the estimated value of a vehicle at the end of a lease term. It represents what the car is expected to be worth after depreciation and is a key factor in determining lease payments.

2. How the Calculation Works

The calculator uses the simple formula:

Where:

• Purchase Price — The original price of the vehicle
• Residual Percentage — The percentage of value retained after lease term (typically 50-60% for 3-year leases)

Example: For a $30,000 car with a 55% residual percentage after 3 years, the residual value would be $16,500.

3. Importance of Residual Value

Details: Higher residual values generally mean lower lease payments since you're only paying for the vehicle's depreciation during the lease term.

4. Using the Calculator

Tips: Enter the vehicle's purchase price and the residual percentage (provided by the leasing company). The calculator will show the estimated end-of-lease value.

5. Frequently Asked Questions (FAQ)

Q1: How is residual percentage determined?
A: Leasing companies set residual percentages based on make/model, historical depreciation, expected mileage, and market conditions.

Q2: Why do some cars have higher residual values?
A: Vehicles with strong brand reputation, reliability, and high demand in the used market typically have higher residual values.

Q3: Can I negotiate the residual value?
A: Residual values are usually fixed by the leasing company, but you can sometimes find leases with better residual terms.

Q4: What happens if the car is worth more than the residual value?
A: You may have equity at lease end - you could buy the car and resell it for profit, or trade it in.

Q5: What if the car is worth less than the residual value?
A: You can simply return the car - the leasing company bears the risk of the actual value being lower.