What Is A Car's Residual Value Lease?

A car's residual value is the value of the car at the end of the lease term. The residual value is also the amount you can buy a car at the end of the lease. A residual percentage will be provided when signing the car lease agreement to help you calculate your car's value at lease end. Your lease payment is basically the depreciation, split up over the lease period with fees and interest included.

Facts About A Car's Residual Value

  • The residual value affects your monthly payment (a higher residual value means a higher monthly payment, compared to a lower residual value for the same vehicles MSRP).
  • The residual value changes every month and year.
  • All lease vehicles lose value over time.
  • Residual values are determined by lending institutions that issue the lease contracts.
  • Past vehicle models and consumer trends affect the residual value of a car.

Example Calculation of A Car's Residual Value Lease

Let us take an example of a lease offer and calculate the residual value.

MSRP - $30,000

Residual - 50%

Lease term - 36 months (10,000miles/year)

To get the residual value, you take 50% of the MSRP and your residual value will be $15,000.

Lease Equity

When your car is worth more at the end of the lease than the buyout residual value estimated provided when you signed the lease agreement, that is what is referred to as lease equity. Lease equity is usually attributed to driving fewer miles compared to your lease limits, having the vehicle in an excellent condition and high market demand for your vehicle model.

Ready to Trade-in or Lease a New Vehicle?

The most important thing is for you to research the vehicles with the best residual value (hold their value well). Now that you have more information of what a car's residual value lease is, you can view our inventory for your next vehicle lease form Larry H. Miller Dealerships. We pride ourselves in providing the best car deals for your budget! Get in touch with us today. We look forward to earning your business.