Residual value
Residual value is one of the constituents of a leasing calculus or operation. It describes the future value of a good in terms of absolute value in monetary terms, and it is sometimes abbreviated into a percentage of the initial price when the item was new. Example: A car is sold at a list price of $20,000 today. After a usage of 36 months and 50,000 miles (ca. 80,467 km) its value is contractually defined as $10,000 or 50%. The credited amount, on which the interest is applied, thus is $20,000 present value minus the present value of $10,000 future value. Residual values are contractually dealt with either in terms of closed contracts or open contracts. In accounting, residual value is another name for salvage value, the remaining value of an asset after it has been fully depreciated, or after deteriorating beyond further use. The residual value derives its calculation from a base price, calculated after depreciation. Residual values are calculated using a number of factors, generally a vehicles market value for the term and mileage required is the start point for the calculation, followed by seasonality, monthly adjustment, lifecycle, and disposal performance. The leasing company setting the residual values