Car Leasing Residual
The
car lease residual is the amount of money that the company leasing the car can pay at the end of the lease term to actually own the car. During the lease agreement, the finance company is still considered the owner of the car. This residual amount is agreed by both the person leasing the car and the finance company providing the lease finance at the beginning of the lease agreement.
The reason for the lease residual is that a
car finance lease is usually between one to five years in length. To keep monthly repayments affordable, the amount paid by the leaser over this period will be less than the value of the vehicle when it is purchased. The residual amount is based on the estimated worth of the car at the end of the leasing period.
The car finance company providing the lease will continue to own the vehicle until this residual has been paid by the company leasing the car. There is no obligation for the leaser to pay the lease residual and purchase the car, but the offer will exist at the end of the agreement.