Estimate a car’s or other asset’s residual value from its original cost, age and yearly depreciation rate, or find the rate from a known residual value.

Declining uses remaining value; linear uses original cost.

15% a year is a typical rough figure for cars (about 20% in the first year). Use your own rate for other assets.

Optional settings

Residual Value Formula

The following formula is the linear-rate model: depreciation is a constant annual percentage of original cost. Select Linear rate in the calculator to reproduce it. Declining balance instead uses RV = C × (1 − D)A, where D is the annual rate as a decimal and A is time in years.

RV = C - (C×D×A)
  • Where RV is the residual value ($)
  • C is the original cost of the item ($)
  • D is the annual depreciation rate (per year, as a decimal; if you have a percent, divide by 100)
  • A is the age of the asset (years)

For the linear model, subtract cost × annual decimal rate × years from original cost. The calculator rejects a negative linear residual rather than silently applying a salvage floor. The declining-balance model applies the annual rate to the remaining value and uses the same power curve for fractional years.

Lease Residual Value from a Percentage

Choose Lease residual (%) when a lease provider gives a residual percentage for a particular term and mileage. Enter the MSRP or adjusted MSRP basis specified by that provider and the quoted percentage. Do not use the annual depreciation rate or automatically substitute a negotiated price for the percentage basis.

Lease residual = MSRP basis × residual percentage ÷ 100. For a $40,000 basis and a quoted 60% residual, the result is $24,000. The percentage already refers to the specified lease term; the calculator does not compound it each year or select a percentage from the term.

Optionally enter adjusted capitalized cost to show depreciation and amortized amounts = adjusted capitalized cost − residual. With a $38,000 adjusted capitalized cost and a $24,000 residual, this is $14,000. Adding a 36-month term gives $388.89 per month of depreciation only. This excludes rent charges, taxes and fees and is not the total lease payment. The illustration requires adjusted capitalized cost to be at least the residual.

Use the provider's actual terms: the result is not a market appraisal, contractual buyout quote or Australian novated-lease minimum. See the Federal Reserve's percentage-residual example and the CFPB's lease payment calculation definitions for the distinction between the residual basis and adjusted capitalized cost.

Residual Value Definition

A residual value is the estimated value of an asset at the end of a specified period, such as a lease term or useful life. It is used in accounting and leasing for assets such as vehicles, equipment and appliances. A lease residual is separately estimated or assigned in the lease; a constant-rate depreciation model does not establish the contractual buyout or actual resale value.

Example Problem

How to calculate residual value?

  1. First, determine the original cost of the asset.

    For this example, we will look at a car that was purchased for $50,000.00.

  2. Next, determine the annual depreciation rate.

    For this illustration, assume a linear rate of 6% of original cost per year; condition alone does not determine that rate.

  3. Next, determine the age of the asset.

    The car in this example problem has been owned for 5 years.

  4. Finally, calculate the residual value.

    Using the formula above, the residual value is calculated as:
    RV = C - (C*D*A)
    RV = $50,000 - ($50,000*(6/100)*5)
    RV = $35,000.00.