How Residual Value Affects Your Lease Payment
A car lease payment has two components: depreciation (vehicle price minus residual value, divided by the term) and a finance charge (both the price and residual times the money factor). A higher residual value reduces the depreciation portion, lowering your monthly payment. But it also means a higher buyout cost at the end if you choose to purchase.
This calculator uses APR / 2400 to approximate the money factor, which is standard practice. For the most accurate results, ask your dealer for the exact money factor used in your quote.
Frequently Asked Questions
Yes. In the US, 55–65% residual at 36 months is generally considered strong. Cars that hold their value well (Japanese brands, certain trucks and SUVs) tend to have higher residuals.
Residual value is typically set by the manufacturer's captive finance arm and is not negotiable. The money factor and capitalized cost (selling price) can sometimes be negotiated.
In a hot used-car market, the car may be worth more than the residual, giving you positive equity. You can buy it at the set residual and either keep it or sell it for a profit.