Guide · Residual value
What a car's residual value is and how it is estimated
A short guide for anyone who sets, reviews or pays for a residual value: leasing and renting companies, lenders, insurers, dealers and drivers comparing offers.
Residual value is what a car will be worth at the end of a term, for example after 36 months and another 60,000 km. It is given as an amount or as a percentage of the new price. It depends mostly on the version, age, mileage, fuel type and country. In a lease it sets the monthly payment: the higher the residual, the lower the payment and the more risk sits with whoever takes the car back.
Definition
A vehicle's residual value (RV) is the market value it keeps after a given term and mileage. It answers a concrete question: what will this car be worth in three years, with another 45,000 km on it.
It is expressed in two ways. As an amount, which is what goes into a contract. And as a percentage of that version's new price, which lets you compare cars at different price points: 50% at 36 months means the car keeps half of its new price after three years.
Residual value, market value, total-loss value and book value
- Market value: what the car is worth today in its market, in average condition. It is the starting point.
- Residual value: the expected market value at a future date, at the end of the term.
- Total-loss value: what an insurer pays when a car is written off, that is, what it was worth just before the loss.
- Book value: what is left on the balance sheet after depreciation. It follows an accounting rule and can drift far from the market.
What drives residual value
- Age and mileage. They weigh the most. Value falls fastest in the first years and more slowly after that.
- The version, not just the model. Engine, power, gearbox and trim move the value within the same model.
- Fuel and technology. Electric cars and plug-in hybrids carry more uncertainty today: cuts to new-car prices, battery range and health, and purchase incentives that change.
- The country. The same car is not worth the same in Spain, Germany or Poland: supply, demand, taxes and currency all differ. A European residual value has to be set country by country.
- The new price. When a manufacturer cuts the new price, or there are many pre-registered cars of a model, used values of that model fall with it.
- Condition, equipment and colour. They move the value above or below average condition.
How residual value sets a lease payment
In a lease, the leasing company buys the car and takes it back at the end of the contract. The payment mostly covers what the car loses in value during the contract: the price minus the residual value. Funding and services come on top.
| Car price | €30,000 |
| Residual value at 36 months (50%) | €15,000 |
| Loss of value to cover | €15,000 |
| Per month, before interest and services | €417 |
Illustrative example with round numbers. Not a valuation.
A high residual lowers the payment and makes the offer more competitive, but if the market pays less at the end, the leasing company absorbs the difference. A low residual protects it and raises the payment. That is why leasing companies check their residuals against an independent market value.
Car finance with a final balloon payment (PCP and similar) works the same way: the balloon is a residual value, and whoever guarantees it carries the risk.
Glossary
- Residual value (RV)
- Expected market value of a vehicle at the end of a term and mileage.
- New price
- Manufacturer's recommended retail price of the new car, for a version and year. Percentage residuals are calculated on it.
- Market value
- What a car is worth today in its market, in average condition.
- Total-loss value
- The car's value just before a loss; what an insurer pays on a write-off.
- Depreciation
- The loss of a car's value with time and use.
- Value curve
- A car's value over time: today, at 6 months, at 12 months… At ARST Data, every 6 months up to 72.
- P10, P50 and P90
- P50 is the central value; P10 (pessimistic) and P90 (optimistic) mark the usual price range. The band is indicative, not a guarantee.
- Term or horizon
- Time until the date you want the value for, in months.
- Annual mileage
- Kilometres the car will cover each year of the term. Together with age, it moves the residual value the most.
- LTV
- Loan-to-value: outstanding debt divided by the car's market value. Above 100%, the car is worth less than what is owed.
- Total loss
- When repairing a car costs more than it is worth; the insurer pays its total-loss value.
- Pre-registered car
- A car registered by a dealer or brand and sold almost unused. A lot of them pushes down used values of the same model.
- Operating lease
- Long-term rental with services included. The car goes back to the leasing company and the payment depends on the residual value.
- Finance lease
- A lease with a purchase option at the end. The value of that option is, in practice, a residual value.
Residual value, country by country
The same car does not keep the same value in every market. These pages explain what we provide in each country and in which currency.
Frequently asked questions
What is a car's residual value?
It is the market value the car will have at the end of a term and mileage, for example after 36 months and 60,000 km. It is given as an amount or as a percentage of the new price.
How is a car's residual value calculated?
You start from the market value of that version and project it to the chosen term by age, annual mileage, fuel type and country. There are fixed tables by segment and models built on market data, which estimate each version and return a P10–P90 range as well as a central value.
What is the difference between residual value and market value?
Market value is what the car is worth today. Residual value is the expected market value at a future date, at the end of the contract or term being analysed.
How does residual value affect a lease payment?
The payment mostly covers the loss of value: price minus residual value, spread over the months of the contract, plus interest and services. A higher residual gives a lower payment but moves more risk to the leasing company.
Why is an electric car's residual value less certain?
Because the things that drive it change faster: the new-car price, battery range and technology, and purchase incentives. That is why the P10–P90 range matters, not just the central value.
Where can I check the residual value of a specific car?
In the ARST Data valuation tool (rv.arstdata.com): pick country, make, model, version, year and mileage to get today's value and the curve up to 72 months with its P10–P90 band. New accounts get 5 credits; companies can use the API and residual tables.