Glossary term
Residual Value
Residual value is the estimated worth of a leased vehicle at the end of the lease, set by the leasing company when you sign. It is usually stated as a percentage of the sticker price. A higher residual means less depreciation to pay for during the lease, which lowers the monthly payment, and it is also your buyout price.
Updated October 17, 2026 · Editorial Team
How Residual Value works in practice
The leasing company predicts how much the car will be worth after the term and mileage you choose. The gap between the capitalized cost and the residual is the depreciation you pay off over the lease. The residual also feeds into the rent charge, because the money factor is applied to the cost plus the residual.
A car with a $35,000 sticker price and a 58% residual for 36 months has a residual value of $20,300. With a $32,000 capitalized cost, you pay for ($32,000 − $20,300) = $11,700 of depreciation, or $325.00 a month before the rent charge and tax.
Residuals are generally not negotiable, but they differ by model, term and mileage allowance, so comparing them is useful. If the car is worth more than the residual at lease end, buying it can make sense; if it is worth less, you can usually hand it back.
Residual Value: quick questions
Can I negotiate the residual value?
Usually not; the leasing company sets it. You can negotiate the capitalized cost and sometimes the money factor.
Why does a higher residual mean a lower payment?
You only pay for the value the car loses during the lease. A higher residual means less lost value to cover.
Does mileage affect residual value?
Yes. Leases with higher annual mileage allowances usually come with lower residuals.
Sources
- Auto loans — Consumer Financial Protection Bureau. Accessed October 17, 2026.
- Regulation Z (Truth in Lending), 12 CFR Part 1026 — Consumer Financial Protection Bureau. Accessed October 17, 2026.
We cite primary sources: regulators, central-bank data and federal agencies. Worked examples on this page are our own calculations. See our methodology.
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