What is the residual value of my lease?

Residual value calculation

The residual value indicated in your leasing contract represents the agreed projected value your car will have at the end of the leasing period. In the case of buying out the vehicle before the lease expires, the intermediate residual value will be higher than the final residual value, as the car is newer and likely has fewer kilometers. Your leasing contract will include a formula to calculate this residual value; you can (and should) also request a written confirmation of the intermediate residual value from your dealer if you are considering terminating your lease.

Contractual value vs. market value

Remember that the residual value of the car is a contractual agreement and does not necessarily reflect the real market value. In most cases, there is a gap between the residual value stated in the contract and the actual market value of the car at the end of the lease.

Market value higher or equal to intermediate residual value

There are rare cases where the price at which you buy back your car matches the current market price. However, this remains an exception.

Market value lower than intermediate residual value

In most cases, you will buy back your car at the intermediate residual value and unfortunately, sell it at a lower price.

While this may seem unfair, the reality is that the price you hope to achieve to avoid losing money in this transaction is not attainable.

Unfortunately, many leasing contracts set excessively high residual values. This is something that should be negotiated when signing the contract, but leaves you with little to no leverage when it comes time to cancel the lease.

The market and your potential buyers, on the other hand, will not take your loss into account when deciding how much they are willing to pay.