Residual value: Meaning (information, definition, explanation, facts)

Residual value is one of the constituents of a leasing calculus or operation. It describes the future value of a good in terms of percentage of depreciation of its initial value.

Example: A car is sold at a list price of EUR 20000 today. After a usage of 36 months and 90000 kilometers its value is contractually defined as 50% or EUR 10000. The credited amount, on which the interest is applied, thus is EUR 20000 present value minus EUR 10000 future value.

Residual values are contractually dealt with either in terms of

• closed contracts

or

• open contracts.