What is a Car Lease Residual? How Does This Affect Your Deal?

Around a car lease dealership, you’ll often hear the term “residual value.” What exactly is the residual value of a car and what does that mean for your lease?

A smart lessee knows that a low monthly payment isn’t all there is to a great lease arrangement. Many Canadian dealerships attract potential customers by offering what seem to be outstanding monthly deals for 0% financing, but if you’ve done your research and know how many factors come into play when negotiating a vehicle lease, you know at these alluring numbers can sometimes be nothing more than a bait and switch tactic to get you in the front door.

Residual value is one of those important factors to keep in mind when deciding which car lease arrangement is in your best interest. It refers to the anticipated value of the vehicle after the end of the lease term, which is why it is going to be lower for longer leases and higher for short lease terms. Residuals are calculated as a percentage of MSRP, rather than the negotiated price of the leased automobile.

To get a truly low monthly car lease payment, make sure that the financing arrangement is calculating a fair residual value for your vehicle by looking at sites such as Canada’s Black Book. According to leaseguide.com, leases that come direct from car manufacturers and their direct dealers are notorious for setting aggressive residuals, and their TV ads can display “subvented” residuals to make a deal look more attractive.

Talk to your car leasing dealership about residuals. Or give one of our honest and knowledge salespeople a call to discuss how you can use your lease’s residual value to get the best deal on your vehicle. At Somerville Auto, we offer a range of flexible lease options, so you can get both the car and the deal that works for you.