To calculate residual value, start with the asset's original purchase price. This is the amount paid when the asset was new, such as the cost of a car, machine, or piece of equipment.

Divide the cash flow in the next year from Step 3 by your Step 4 result to calculate the residual value. Concluding the example, divide $51,000 by 0.08 to get a $637,500 residual value.

Discover what residual value is as it relates to leasing a vehicle, learn how to calculate it, and explore its effects to help you make more informed decisions.