What is the meaning of residual value?

Term used to describe the market or sale value of leased equipment (net of removal or disposal costs) at the end of the lease term. In most cases, it is projected or estimated. Sometimes called salvage value. With some exceptions, national bank lessors are subject to a rule that limits the' residual value' assumption made at the time the lease is created to 25 percent of the equipment's cost. Bank holding company leasing subsidiaries are subject to a 20 percent limit on the residual assumption.