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Jan 02, 2019

What is Residual Value?

Get a car on lease, to enjoy a comfortable and reliable ride on the vehicle that you desire. With this, comes the concept of Residual Value that will help in calculating the value of vehicle at the end of lease. This will improve the process of car lease negotiations that would eventually reduce your pocket’s expense.

Discussed below is an overview to the residual value, its importance in vehicle lease negotiation, calculation of residual value and more;

Residual Value

A car’s residual value is an approximate figure for your car when your lease is up. It is important to understand that higher the residual value higher is the resale value for a vehicle i.e., a car with higher resale value over time will have higher residual value. The importance of calculating the residual value;

- The depreciation between the vehicle’s current value and residual value will be used to calculate the monthly car rental premium.
- It defines the value of car, if in case you want to buy the car after the lease tenure.
- The residual value will provide you the value that you will be paying now and what will you be paying later for purchasing a vehicle.

How to Calculate Residual Value?

A residual value is calculated by the estimated depreciation value as a percentage of on-road price of your vehicle. Considering an example: You want a car on lease worth 7 lakhs for a duration of 3 years (36 months) and suppose the car depreciates 50% after 3 years. Then, the car will have a residual value of 3.5 lakhs at end of lease and the monthly lease payment will be calculated using this amount.

Tips for Lease Negotiation

The residual value is an approximate figure. The residual value varies for different vendors thereby resulting in variation of monthly lease premium for a vehicle rented for same duration of time.

Listed below are the key pointers that should be kept in mind, while negotiations the car rental premium;

Research: Consider checking the statics for resale value of your vehicle. Calculate yourself the depreciation value of your car.
If in case, you want to purchase a vehicle. You will be paying almost a similar amount i.e, either payable in the beginning as down payment or the summation of the monthly premiums. However, for cases when the user doesn’t want to purchase the vehicle and keep further options open, then it is better to negotiate for a higher residual value to reduce the monthly premiums.

Comparison: You can ask different vendors to share the lease premium and the residual value for a particular time frame. With this, you will be able to negotiate at the best margin.
For calculating the residual value of your car, you can visit www.orangebookvalue.com.

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Privacy Policy | Terms of Use
What Is OBV?

Orange Book Value is a platform that helps in determining the fair market price of used vehicles. It is basically an algorithmic pricing engine that suggests market value of used cars, used bikes and used scooters. Questions like what is the value of my used car or used bike come to our mind when we decide to sell it off. However, we do not get to understand the proper valuation of our vehicles.

In order to come up with a proper used car valuation or used bike valuation, Orange Book Value uses real time data science to value depreciation of automobiles. It helps the sellers put a fair price in front of the buyer, and for the buyers, it helps them get a product that serves great value for their money. This is a service by droom, which was founded by Sandeep Aggarwal.

Why OBV?

Orange Book Value works as an independent value calculator for cars, bikes and scooters that determines second-hand vehicle prices. It uses Droom's proprietary technology and data science to come up with fair market price of used cars, bikes and scooters, and utilises scientific data to get the exact value for the vehicle. The primary objective of this used-vehicle price guide is to get the fair market price for second-hand vehicles.

Another reason for using Orange Book Value is its unbiased results that help in obtaining reliable data on used-vehicle pricing. Also, it is the kind of valuation tool for used scooters, bikes and cars that calculates the data on real-time basis with a scientific method of suggesting their current market value.

How Does It Work?

To get the fair market price of your used vehicle, you need to follow just four simple steps. At first, you need to select the purpose, that means whether you want to buy or sell the vehicle. After that you need to select the category of used vehicle, which is whether you have a used car, bike or scooter. The next step is selecting the parameters such as make, model, year, trim, etc., of the product for which you need to get the correct market valuation. The market value of your used bike, car or scooter will highly depend on the condition of the vehicle and the kms driven. After that, you will get the exact valuation of your vehicle through Orange Book Value.

Benefits Of OBV

Orange Book Value helps buyers to understand the fair value of a used car, bike or scooter. This way, the buyer will not have to guess the price of a used car or bike and can be satisfied with price that he/she is paying for the product. For sellers, it helps in determining the best market value for their used vehicle. This valuation tool for used cars and bikes creates a transparency in the overall process. This is a pricing guide for used cars, used bikes and used scooters that helps in quick selling of second-hand vehicles. For banks and NBFCs, it helps in getting the fair pricing of used vehicles that further enhances the process of loan approvals. For insurance companies as well, the real-time data obtained through scientific calculation helps in obtaining the current valuation of the second-hand cars, bikes and scooters.

OBV Methodology

Being the most advanced algorithmic and data science-based value calculator, Orange Book Value is the most accurate valuation tool for used cars, bike and scooters in India. Unlike other pricing engines, Orange Book Value utilises Droom's proprietary data science methodologies and latest technologies to get the correct pricing of used cars, bikes and scooters depending upon various factors that lead to value depreciation such as make, model, trim, data for kms driven that is obtained through odometer reading, current condition of the vehicle that includes wear and tear, dents, major repair works, etc. A vehicle that is well-maintained and kept in good shape gets to score more in the OBV methodology and gets a better market value.

Appropriate Condition

Orange Book Value calculates the valuation of a used car, bike or scooter according to different parameters that cause value depreciation of second-hand vehicles. When pricing engine comes up with a particular result based on the make, year of manufacture, trim of the vehicle, odometer reading that decides the total number of kms driven and the physical and mechanical condition of the vehicle, the used cars and bikes are rated on its basis. These ratings include Excellent, Very Good, Good and Fair. While Excellent and Very Good signify a healthy used car, Good and Fair indicate that it has problem with some of the parts and needs special attention and repairing.

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