What is residual value?

A:

Residual value is the forecast trade disposal value at the end of the operating period. 

The residual value of your fleet vehicles is determined by the rate of depreciation that affects the vehicle. Depreciation in most cases can be the biggest cost to fleets as over the term vehicles lose value, some quicker than others.

The residual value of vehicles can be difficult to determine, market analysts publish forecasts on residual values when a vehicle is released, however these percentages can fail to examine the whole picture when mileage, damage and working environment can also affect the residual value.

Different vehicles depreciate at different levels, fleets have become even more stringent when selecting vehicles to keep the loss to a minimum.

The residual value is how much the car is worth but not the selling price, it provides a benchmark when you come to remarket your company’s fleet vehicles. There is certain information we can use to estimate a vehicle’s residual value, such as information from vehicle manufacturers, auction prices and historical residual data for vehicles. But it ultimately comes down to how much a used car buyer is prepared to pay for it.

We use this terminology in our Car Running Costs calculator.