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When it comes to leasing a car, the vehicle’s residual value is key. But what is residual value — and why is it important?
The residual value is set at the start of your lease by the leasing company, which may be the car dealership or another financer. It’s the anticipated value of the car at the end of the lease, nearly always expressed as a percentage, and is used to determine your monthly lease payments. If you decide to buy your leased car, the price is the residual value plus any fees.
As you may have guessed, the higher the residual, the better your lease deal should be. This is because you are covering less depreciation over the course of your lease term.
Figure 1 is an example of RVs for various Chrysler 300 trims and their lease durations (24, 27, 36, 39, 42, and 48 months). RVs are different for both lease duration and annual mileage. Manufacturer (ie: Audi Financial Services) programs itemize RVs for 15k miles per annum.
In all cases, add +2% for 12k mileage and +3% for 10k mileage to all RV numbers found in Figure 1.