Residual value basics

Why this matters when you buy

A vehicle that holds value returns more cash at exit, which directly reduces five-year TCO. Two cars with similar running costs can diverge sharply if one depreciates faster.

How CarCostIQ models it

I multiply MSRP (plus any purchase extras in the purchase line) by the residual rate you choose, once at the end of the horizon, and subtract that amount from accumulated costs. It is not a monthly depreciation schedule — it is a single exit credit to keep the tool transparent.

Real-world caveats

Real resale depends on kilometres, condition, colour, supply of used stock, and timing. EV residuals have moved quickly in recent years; use the sliders to stress-test rather than treating defaults as forecasts.

Simple practical example

On a $45,000 purchase, a 50% residual credits $22,500 at exit; cutting that to 40% removes $4,500 from your five-year story — roughly $900/year equivalent. For someone driving 12,000 km/year, that is often larger than the annual energy delta between efficient EV and efficient petrol unless tariffs and pump prices are extreme. Slide residual up and down in the calculator whenever you are unsure.

Common misunderstanding

Thinking a higher MSRP car always loses more dollars. Percentage residual matters more for TCO than nominal depreciation; an expensive car with strong percentage retention can still exit favourably.

What to override in the calculator

Always stress-test residual for both sides (pessimistic and optimistic). Pair that with realistic annual km — high km makes energy matter more, which can offset a softer residual on one vehicle.

Frequently asked questions

How is residual modelled?

As a fraction of MSRP retained at the end of the comparison period, applied once as a credit against total cost.

Does a higher residual always mean cheaper ownership?

All else equal, yes — but purchase price and running costs still dominate for many drivers. Raise and lower residual in the calculator to see sensitivity.

Why not use Glass’s Guide or live listings?

Public calculators need stable, auditable inputs. Market listings shift weekly; methodology explains the simplification.

I plan to keep the car for ten years — should I change residual?

The tool compares a fixed horizon. For longer holds, residual still closes the five-year window fairly, but you may want to re-run with a longer period if the product exposes that control.

Do on-road extras count in residual?

Purchase extras you add flow into the purchase cost line; residual is applied consistently to the configured purchase base as documented in methodology.

Can residual hide a bad energy story?

Rarely if you drive a lot — high km magnifies energy. Run the sensitivity chips on the result page alongside residual tweaks.