Taking on a Lexus lease is a popular way for Valencia, CA drivers to experience a new Lexus model’s luxury, technology, and performance without the long-term commitment of buying. A key term you’ll encounter during the lease signing process at Lexus of Valencia is “residual value.” Understanding what Lexus lease residual value means is essential to grasping the overall structure of your lease.
Residual Value: A Definition
The residual value of a lease can be thought of as the predicted wholesale value of your chosen Lexus vehicle at the end of your lease term. It’s an estimate determined at the beginning of your lease by the leasing institution of what the car is expected to be worth after a set period and the agreed-upon mileage allowance. The prediction is based upon several factors, including:
- Market trends
- Historical data
- The specific model’s desirability
- The car’s expected rate of depreciation
How Residual Value Affects Your Lease Payment
Your monthly lease payment is primarily calculated based on the vehicle’s expected depreciation during the lease term (typically 24 or 36 months). This depreciation is the difference between the vehicle’s negotiated price – also known as the capitalized cost – and its predetermined residual value, plus any finance charges and taxes.
The key is that a higher residual value generally means the Lexus car is predicted to depreciate less, leading to lower monthly payments. Because Lexus vehicles are known for holding their values well over time, they often have high residual values.
Lease a Lexus Car in Valencia, CA
Here at Lexus of Valencia, our friendly finance team is ready to answer any questions you may have about your Lexus lease. Visit us today to discover a Lexus SUV, sedan, or coupe that best fits your needs.
