The term, residualized value, in car leasing refers to the calculation of lease-end residual value on a leased vehicle as well as optional equipment that may be installed on a vehicle. Although the base price of a car will contribute to the residual value, some installed equipment or features may not, depending on lease finance company policy.

As an example, let’s say that a particular vehicle has a 50% residual percentage. The vehicle has a “luxury” feature package installed that includes upgraded floor mats, wood grain paneling, an upscale sound system, and leather-lined seats. The package costs $2000 and is part of the car’s $30,000 MSRP. The lease finance company chooses not to “residualize” the luxury package, feeling that it will not contribute to the future value of the car. Therefore, the residual value for this car is based on only $28,000 of the full MSRP. At 50% of $28,000, the residual comes to only $14,000, not $15,000 as might have been expected.