How is residual value calculated on a lease

Asked by Mar 29, 2013 at 11:36 AM about the 2012 Porsche 911 Carrera S Cabriolet

Question type: General

When I'm in the finance office deciding on a lease verses purchase how do they calculate the residual value of a cars worth in 3 years

1 Answer

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Residual value in car leasing, refers to the estimated value of a leased vehicle at the end of the scheduled lease period. The longer the lease, the lower the residual value, as compared to the original MSRP sticker price. Residual values play a key part in the calculation of lease monthly payments since leases are based on the difference between residual value and negotiated selling price. The higher the residual, the lower the lease cost for a given selling price. You can negotiate the value to lower your monthly payment within reason.

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