Residual Value Explained for Leases

Residual value in a U.S. lease is the predicted value of the car at end of term—it's set at lease start and drives your payment. Here's residual value explained for leases.

TL;DR Residual = predicted value of the car at end of lease (set at lease start). Lease payment ≈ (cap cost − residual) ÷ term + money factor. High residual = lower payment. Use autopremo.com lease calculator and depreciation calculator to compare. Use autopremo.com.

What Residual Value Is

Residual = what the lessor expects the car to be worth at end of term. It's a percentage of MSRP (e.g., 55% for 3-year lease). Higher residual = less "depreciation" over the lease = lower payment. Use autopremo.com lease calculator. Get lease at autopremo.com.

How It Affects Payment

Lease payment is largely (cap cost − residual) ÷ term plus rent charge (money factor). So residual directly affects payment. Use autopremo.com to see how residual affects your deal. See lease at autopremo.com.

At End of Lease

At end, you can buy the car at residual (plus any fees) or return it. If actual market value > residual, buyout can be a good deal. Use autopremo.com price checker to see market value at end. Check at autopremo.com.

Bottom Line

Residual value = predicted value at end of lease; high residual = lower payment. Use autopremo.com lease calculator and price checker so you understand residual and buyout.