09.10.2020

Residual value, what you need to know

What is residual value?

It corresponds to the value of a property at the end of its rental period (leasing). It is used by companies to determine the value of their fixed assets (furniture, vehicles, etc.) when they have been depreciated. Therefore, the residual value can be said to be equal to the acquisition cost of the asset, minus the accumulated depreciation during the lease or use period. 

The residual value cannot be negative, it can be positive or zero. 

 

Residual value: how does it work?

The residual value is one of the most important elements of leasing contracts. It allows a company or an individual to rent equipment (office equipment, vehicles, machinery and tools, etc.) and to become the owner of them at the end of the contract if they wish to do so (purchase option = residual value). This trade-in amount is set in advance by the leasing provider (this can however be negotiated upwards or downwards). 

In lease contracts with an option to purchase, it is possible to lease a new car for a fixed period of time without it being intended to be sold to the contractor. The residual value is an important parameter when it comes to setting the rental amount. The lower the residual value, the higher the monthly payment, conversely, the higher the residual value, the lower the monthly payment. 

That is, if the vehicle can be resold at a good price at the end of the contract, the person renting the vehicle will offer a lower monthly payment because the risk of not reselling the vehicle is low. And so if this residual value is low, the lessor takes "more risk" and less return on the sale of the vehicle, so the monthly payments will be higher. 

In a leasing-purchase contract, the residual value is included in the price of the monthly payment, i.e. you will become the owner of the property at the end of the contract, so the monthly payment is of course higher. As an alternative to leasing sales, we recommend a car loan, so you will immediately become the owner of the vehicle and you will be able to deduct the interest from taxes and do what you want with the car because it belongs to you, unlike leasing where it belongs to the bank that issues the lease. 

To learn more about the differences between a lease and a car loan, we invite you to read this article. 

 

What is the amount of reimbursement for a property in the event of a claim?

If a loss occurs, the "reimbursement" of the damaged property will be based on the residual value, more precisely on the current appraised value of the property. For a car, this will usually be the value of the Argus and the amount will be paid directly to the leasing company. 

 

Conclusion 

In conclusion, it's up to you to decide what you're looking for when you want to buy a new vehicle. 

If you want to pay a small monthly fee and become a homeowner at the end of the lease, opt for a lease with an option to purchase where you have negotiated a large residual value with the seller. 

Do you just want to pay a small monthly fee?  Then go for a lease with no residual value (without an option to buy). 

However, if you want to own the vehicle at the end of the contract, opt for a car loan, or possibly a lease-to-purchase.

Do you want to take out a car loan? Make your free request in 2 minutes on our website or call us on 021 620 60 00.

 

 

 



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Remember your first time?

You put on your best suit or dress to visit the person who will have a huge influence on your life and plans. You're kind of going to meet your significant other. 

The appointment is set, the address where the 'date' will take place is known and you are not sure what to expect.

The date goes as you hoped, the charm works. And then comes the fateful moment, the question that will decide the rest of your meeting... 'What guarantees do you have so that we can review your loan application?'

The cold shower, the atmosphere changes abruptly... You were simply hoping to benefit from financial assistance for your project and you realize that without funds, without goods, without a contribution... This will be more complicated than expected.

As everyone knows, in order to benefit from a bank loan  , you need to present assets in return. The system is thus set up and serves as a margin of safety that allows our financial institutions to take as little risk as possible in granting a loan. Is that fair? Is it romantic? It's simply a give-and-take game.

 

Will history repeat itself?

It all depends on your need. There is indeed a form of financing that does not require any contribution or even the slightest commitment before the contract is signed.

This form of financing is private credit. No need to advance a sum, no need for collateral, no need for guarantees from a third party.

All you need to do is be domiciled in Switzerland, be of legal age and have a file that meets the legal standards in force. 

Of course, additional acceptance criteria are applied once your application has been submitted. Each bank has a set of rules that will need to be agreed to in order for you to benefit from a favorable review. It is therefore essential to gather all the supporting documents to maximize your chances.

Apart from that, there are no guarantees, no advances, no collateral... is not required beforehand.

 

What's the catch?

There is none. A financing platform such as Milenia puts together your file by simply making sure that your budget is in line with the amount requested. It's about presenting you with a responsible and repayable loan. It's as simple as that.

Do I still need to provide documents?

Yes, it is essential to put together an application that meets the established criteria. Repayment capacity, indebtedness, marital status, ZEK and CRIF history, etc.

Is it a cumbersome administrative procedure?

Absolutely not. You will be accompanied and advised. With just a few steps, all the necessary documents are gathered and you will receive a financing proposal within 24 hours. Are you happy with the conditions? Your money is paid out immediately after you sign the credit agreement. It's simple and it's fast.

 

Does it work to buy a vehicle? To finance a furniture project? To pay for my studies?

Yes, yes, yes. The advantage of a loan of this type is also your freedom to use the borrowed funds according to the need you encounter.

Not a fan of the leasing principle  ? You can buy your car in cash. The vehicle is fully yours, you are free to resell it whenever you want, you are not tied to a specific garage or dealership and the type of insurance policy taken out is at your convenience.

Need to renovate your apartment? No need to go through a mortgage. In order to circumvent the complexity of this type of arrangement, a personal loan is indeed an attractive solution. Of course, it all depends on the amount involved, but the simplicity of a loan application combined with the fact that you do not have to pre-finance a loan is very attractive.

Are the registration fees for your studies high? Credit can help. When you're just starting out in the workforce, which is the case for most people entering higher education, needless to say, you're not immersed in cash. As long as your approach is balanced and well thought out, access to a personal loan makes things a lot easier. This way, you can devote yourself fully to succeeding in your academic endeavours!

We repeat; As long as the credit solution is balanced and respectful of your personal and financial reality, it is undoubtedly the least restrictive and easiest to carry out financing method available on the market.

 

How do I do it?

It's easy. All you have to do is go to a financing platform, make a simulation including the amount, duration and the expected interest rate. You will then be contacted for an exchange allowing your personal advisor to further your query. Once the required information has been gathered and you give your consent, your request will be sent to one of the partner banks that is best able to respond favourably.

The contract will then be sent to you. After signing, the amount is paid into your account. Your personal advisor will guide you from the beginning of the process to the receipt of the funds. 

One last thing, not only will you not be asked for any guarantee, but there will be no application fees or remuneration required for the management of your file. This is taken care of by the bank. So don't rely on organizations that charge application fees, study fees, or commissions for advice. You don't have to pay anything upfront to your advisor or the financial institution.

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