How Do You Calculate Automobile Lease Residual Values?
The residual value of a car, when a lease is up, depends upon a residual value factor determined by the institution that finances the lease, which is often not the car dealership. The institution decides on a residual value factor based on its business model, which dictates the percentage of profit that the company tries to bring in on individual payments versus a buyout at the end of the lease. Residual value factors are expressed as percentages of the car manufacturer’s suggested retail price (MSRP). Ask your dealership what the residual lease factor is for the car that you are considering leasing. If they don’t know, ask to talk to their lease financier. For instance, you might find out that the residual value factor for the car you are considering is 45 percent at the end of the lease. Look at the car’s window sticker to find out its MSRP. For instance, the car you are considering might have an MSRP of $27,000. Multiply the MSRP by the residual value factor to determine how much th
