Why Residual Values Are So Important When Leasing a Car

Everyone focuses on low monthly payments and assumes they're getting a good deal. What most people don't realize is how residual values affect the price of your monthly lease payments. (Residual value refers to the value of the vehicle at the end of the lease).

Leasing a car is similar to renting a car on a long-term basis. Unlike renting a house or apartment, cars lose their value while you drive them, and so you need to pay the cost of this depreciation as part of your lease. In fact, depreciation cost makes up the bulk of your monthly lease payment.

If cars didn't depreciate, a typical lease payment on a $30,000 car would only be about $150 per month. How nice would that be?

To show you how important residual values are, let's take look at a real life example of how you can lease a $51,500 Toyota 4Runner and pay a lower lease payment than if you leased an Alfa Romeo Giulia, which is a vehicle that costs $5,000 less.

These figures are based on a 6% finance charge and a 7% sales tax rate.

You would actually save $243 per month if you were to lease the 4Runner. That comes out to a savings of over $8,700 after 36 months. When you account for the MSRP price difference, leasing a Toyota 4Runner versus an Alfa Romeo Giulia will save you over $8,700 and allow you to drive a vehicle worth $5,000 more — unbelievable!

The reason it works out this way is due to the residual values of these particular vehicles. The 4Runner has a high residual value and is expected to retain 67% of its MSRP value after 36 months. The Alfa Romeo Giulia on the other hand, has a residual value of only 42%. The depreciation cost on the Giulia is $749 per month compared to $472 per month on the 4Runner.

Hopefully, this opens your eyes and shows you why you need to pay attention to the residual value of the car you're thinking about leasing. Only lease cars that hold their value well, or you'll be paying a lot more than you should.

Here is a list of the top 40 cars with the best residual values.

Last reviewed: January 2026