1. What is Salvage Value in Car Leasing?

The salvage value (also called residual value) in car leasing is the estimated value of the vehicle at the end of the lease term. It represents how much the vehicle is expected to be worth after depreciation during the lease period.

2. How Does the Calculator Work?

The calculator uses the salvage value formula:

Where:

• Vehicle's Original Value — The original price of the vehicle (USD)
• Residual Percentage — The percentage of value expected to remain at lease end (%)

Explanation: The residual percentage is typically determined by the leasing company based on the vehicle make/model, lease term, and expected mileage.

3. Importance of Salvage Value

Details: The salvage value directly affects your monthly lease payments. A higher residual value means lower depreciation costs spread over the lease term, resulting in lower monthly payments.

4. Using the Calculator

Tips: Enter the vehicle's original purchase price and the residual percentage provided by your leasing company. Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How is residual percentage determined?
A: Leasing companies use historical data, vehicle brand reputation, and expected market conditions to set residual percentages.

Q2: What's a typical residual percentage?
A: For a 3-year lease, residual percentages typically range from 50-60% of the original value for most vehicles.

Q3: Does mileage affect salvage value?
A: Yes, exceeding mileage limits in your lease agreement will reduce the actual salvage value and may result in additional charges.

Q4: Can I negotiate the residual value?
A: Generally no, as it's set by the leasing company based on their risk assessment, though some luxury brands may offer higher residuals.

Q5: What happens if the actual value differs from salvage value?
A: The leasing company bears this risk in a closed-end lease (most common), while in an open-end lease, the lessee assumes this risk.