What is the residual value of a car?

Dmitriy Fomichenko, President, Sense Financial

@dfomichenko • 10/13/16 This answer was first published on 10/13/16. For the most current information about a financial product, you should always check and confirm accuracy with the offering financial institution. Editorial and user-generated content is not provided, reviewed or endorsed by any company.

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The residual value of a car is a parameter used by car leasing companies to identify monthly lease payments. Companies calculate it by subtracting the depreciation out of the manufacturer's suggested retail price (MSRP).

For an instance, a car with an MSRP of $20,000 and a residual value of 50% after 3 years or $50,000 would be worth $10,000 at the end of that period i.e. 3 years. Car leasing companies add interest, taxes, and their fee to your monthly lease payments.

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