What is Residual Value? How It Affects Your Lease Payment

Residual Value is the predicted worth of a leased car at lease-end, expressed as % of MSRP. Higher residual = lower monthly payment. Learn which cars lease best.

Term: Residual Value

Residual Value is the predicted value of a leased vehicle at the end of the lease term, expressed as a percentage of MSRP. A higher residual means lower monthly payments because you're paying for less depreciation. Residual values are set by the manufacturer's finance company and are not negotiable.

Verdict: Legitimate

N/A - This is a lease term, not a fee

How Residual Affects Your Payment

Example: $50,000 MSRP, 36-month lease

50% Residual

Depreciation: $25,000

Higher payment

65% Residual

Depreciation: $17,500

Lower payment

High vs. Low Residual Vehicles

High Residual (Good to Lease)Low Residual (Bad to Lease)
Toyota/Lexus (55-65%)Most EVs (35-45%)
Honda/Acura (55-62%)Luxury sedans (40-50%)
Porsche (60-70%)First-year redesigns
Pro Tip

While residual is not negotiable, you can negotiate the Cap Cost (selling price). A $2,000 discount on Cap Cost = ~$56/month savings on a 36-month lease.