Residual value is the estimated value of an asset at the end of its lease term or economic life.

In general, the longer an asset is used, the lower its expected residual value. Lessors consider the expected residual value when calculating lease payments for the asset.

A lessee may guarantee the residual value to the lessor. If the lessee does not provide such a guarantee, the amount is treated as an unguaranteed residual value.