1. What is Residual Value?

The residual value of a car is its estimated worth at the end of a lease term. It's a key factor in determining monthly lease payments and represents the car's projected depreciation over the lease period.

2. How Does the Calculator Work?

The calculator uses the residual value formula:

Where:

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

Explanation: The residual percentage is determined by the leasing company based on the vehicle's make, model, lease term, and projected mileage.

3. Importance of Residual Value

Details: Higher residual values generally result in lower monthly lease payments since you're only paying for the vehicle's depreciation during the lease term, not its full value.

4. Using the Calculator

Tips: Enter the vehicle's purchase price and the residual percentage provided by your leasing company. The residual percentage is typically between 40-70% depending on lease terms and vehicle type.

5. Frequently Asked Questions (FAQ)

Q1: How is residual percentage determined?
A: Leasing companies set residual percentages based on historical depreciation data, vehicle reliability, brand reputation, and market demand.

Q2: Why do luxury cars often have higher residual values?
A: Luxury vehicles typically retain value better due to higher build quality, brand prestige, and stronger secondary markets.

Q3: How does mileage affect residual value?
A: Higher mileage allowances decrease residual value since more miles mean more wear and tear on the vehicle.

Q4: Can I negotiate the residual value?
A: Residual values are usually set by the leasing company and aren't negotiable, but you can sometimes find leases with better residual terms.

Q5: What's a good residual percentage?
A: Generally, 55% or higher after 3 years is considered good, though this varies by vehicle type and market conditions.