If you like to have access to the latest automotive features and technologies more often, you may choose to lease instead of finance for the opportunity to upgrade sooner. Additionally, another benefit to leasing is that it costs less over the same time period, thanks to lower monthly payments and sales tax versus financing. One factor to keep in mind when considering a lease is the vehicle's residual value.

Since leasing entails paying to use a vehicle for a predetermined period of time, the lease payments cover the vehicle's decrease in value, or depreciation. Residual value is what the lessor expects the vehicle to be worth at the end of the lease.

How is residual value calculated?

Leasing companies calculate residual value by accounting for a variety of factors, including perceived reliability, safety, resale value, and estimated future market conditions. Additional factors like new technologies, gas prices, and economic conditions can also affect residual value.

For example, if a vehicle has an MSRP of $42,000 and the projected residual value after a three-year lease is 55%, then it's expected to be worth $23,100 when it's returned to the dealer.

How is residual value different from resale value?

Resale value measures the vehicle's actual worth after accounting for depreciation, mileage, and condition. Residual value is determined in advance and based on the MSRP.

Why is residual value important?

A higher residual value means the dealer expects to be able to resell the vehicle for more money at the end of your lease, affecting how much the lessee is expected to pay. Furthermore, say a vehicle's residual value is $23,100, and the resale value ends up being $25,500 at the end of the lease. In this case, you may choose to exercise the lease's buyout option and purchase the vehicle for what is essentially a $2,400 discount. If the resale value happens to be less than the expected residual value, lease contract terms protect the lessee from the cost of unexpected depreciation.

Lease a new Acura near Framingham and Norwood

Get in touch with Prime Acura Westwood to learn more about Acura leasing options. And if you'd like to get behind the wheel to check out the premium accommodations and amenities for yourself, we welcome you to visit us for a test drive. We'll be happy to give you a tour.

Categories: Finance, New Inventory