The residual value of a leased vehicle is the estimated value the car is expected to have at the end of the lease term. It’s usually set by the leasing company before you sign, and it helps determine your monthly payment and buyout price at lease end.

Quick Scoop

In simple terms, residual value is the car’s “projected worth” after depreciation over the lease period.

A higher residual value generally means lower monthly payments, but a higher amount if you want to buy the car later.

How It’s Calculated

Leasing companies typically estimate residual value as a percentage of the vehicle’s MSRP, not the negotiated sale price.

A common rough range is about 50% to 60% of MSRP by the end of the lease, though the exact number depends on the vehicle and lease terms.

Example

If a car has an MSRP of $40,000 and a residual value of 50%, the residual value would be $20,000.

That $20,000 is the amount the lender expects the car to be worth at lease end, and it may also be the buyout price before fees.

Why It Matters

Residual value affects:

  • Your monthly lease payment.
  • The cost to buy the vehicle after the lease.
  • How much depreciation you’re effectively paying for during the lease.

If you want, I can also explain how residual value differs from money factor, or help you estimate a lease payment.