Financial Terms Glossary

Residual Value

Formal

Used in leasing and Contract Hire - it's the forecast of value attributed to the item being rented at the end of the primary lease period. This value 'risk' is pre-determined and taken by the supplier or other third party. This arrangement can make the use of the asset for the customer much cheaper than ownership over that same period.

Informal

When a rental/lease or hire agreement is entered into, the provider of the service assumes that the asset being used has a value at the end of the original rental contract period. This is its 'residual value'. It's what they think it's worth when you've had enough of it and want it off your driveway or out of your life. Not appropriate for humans.

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