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The estimated value of an asset at the end of a lease term or depreciation period — used by lessors to set lease rates and by accountants to calculate depreciation charges.
Residual value (RV) is the projected market value of equipment at a specific future date, most commonly at the end of a lease term.
Residual value in leasing
A lessor (the company financing the equipment) retains the residual risk: if actual market value at lease end is lower than the projected RV, the lessor absorbs the loss. This is why lessors build residual assumptions conservatively.
Residual value in accounting
Under IFRS 16 and ASC 842, the residual value determines the depreciable amount:
Depreciable amount = Cost − Residual Value
A higher residual value means lower annual depreciation, which improves near-term profitability but must be supportable by market evidence.
What drives residual value
Available marketplace listings can provide asking-price context, but they are not completed-sale evidence and do not by themselves establish a residual-value projection.
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