Residual value
The predicted worth of a car after a set period and mileage — the forecast that anchors lease payments and total cost calculations.
Residual value is a forecast: what will this car be worth after, say, three years and a stated mileage? Where depreciation is the loss measured after the fact, the residual is the industry's bet on that loss in advance — estimated by leasing companies, banks, and specialist guides from auction data and model history, usually expressed as a percentage of the original price.
The forecast has direct financial teeth. A lease payment is essentially the gap between the new price and the residual, spread over the term: a car predicted to hold its value leases cheaply relative to its price, which is why two similarly priced cars can carry very different monthly rates. In some finance products the figure is even guaranteed, shifting the resale risk to the lender. Strong residuals also soften loan-based ownership, since more equity survives to trade-in day.
When comparing offers, ask what residual assumption sits inside the payment — it is the number doing the real work.