Lease Residual Value is the pre-determined wholesale market value that a vehicle is projected to retain at the conclusion of an auto lease (typically 24, 36, or 39 months), set by the leasing bank and automotive guidebooks (such as ALG / J.D. Power).
Critically, the Residual Percentage (e.g., 58% after 36 months at 12,000 miles/year) is always multiplied against the vehicle's Original Sticker MSRP — never the discounted price you negotiate. Because you only pay for the value the car *loses* during your lease term (Net Cap Cost minus Residual Value), a higher residual value directly produces a lower monthly lease payment.
At lease maturity, the Residual Value becomes your guaranteed Lease-End Buyout Price: - If the vehicle’s actual market value at Month 36 is *higher* than the Residual Value, you have Positive Lease Equity (you can buy the car for the lower residual price or trade it in to capture the equity). - If the vehicle’s market value has crashed *below* the Residual Value, you can simply return the keys to the lessor and walk away from the depreciation loss.