The expected value of an asset at the end of a lease term.
For example, a lender estimates the residual value of a $100,000 tractor at 30% ($30,000) at the end of a 5-year lease. The lower the residual, the higher the monthly lease payment — because the lessee is financing a greater portion of the asset's total depreciation.
Why it matters: It affects the monthly lease payments and determines the buyout cost at the end of the lease term.
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