Residual value risk calculator for device leasing and forward trade-in
See what a market decline could cost your programme. It's free and needs no sign-up.
Forward trade-in assumptions
The starting values are examples, not benchmarks. Replace them with your own.
Residual value exposure
€279,650
What this book could lose if the market ends 5 points below your residual.
- Each extra point of decline
- €83,930
- Devices returned
- 7,000
- Loss per return
- €40
- Residual per device
- €360
- Customer payment, before interest and fees
- €34.97 / month
A range, not a single number
Uncertainty grows with the term, so a device's future value is better seen as a range. You choose where your residual sits against it, and that gap is your risk buffer. Use the calculator to test what happens if the market ends below it.
How the calculation works
Forward trade-in
Customers can usually keep the device, so only returned devices can create a loss.
- Devices returned = devices on the book × return rate
- Loss per return = (device price × points below the residual) − condition deduction, with a minimum of zero
- Exposure = devices returned × loss per return
Leasing
The customer can usually buy the device at the end of the term, so only returned devices can create a loss.
- Devices returned = devices on the book × (1 − buyout rate)
- Loss per return = device price × points below the residual
- Exposure = devices returned × loss per return
Results exclude early exits, resale costs, interest, funding costs and tax. The market shortfall can't be larger than the residual itself, because a device can't be worth less than zero.
Common questions
- What is residual value risk?
- It is the risk that a device is worth less at the end of a contract than the value set when the contract began. Whoever committed to that value, such as a retailer, telco, lessor or underwriter, usually absorbs the difference. See residual value forecasting.
- What does “points below the residual” mean?
- One point is 1% of the device price. On a €1,199 phone with a 30% residual, a market that ends 5 points lower values the phone at 25% of its price, which is about €60 below the €360 residual.
- Why does forward trade-in have a return rate?
- In a forward trade-in the customer can usually keep the device by paying the balance. Customers are more likely to return a device worth less than the guaranteed value, so test a higher return rate when you model a falling market.
- How is leasing calculated differently?
- In a lease the provider usually owns the device. The calculator therefore counts every device as returned unless the customer keeps it through a buyout option, and it has no condition deduction.
- Does this calculator forecast device prices?
- No. It only applies arithmetic to the numbers you enter, and it uses no market data. It shows how much a decline would cost if it happened, not how likely that decline is.
- Is my data saved?
- No. Your numbers stay in your browser unless you copy a scenario link, which puts them in the link itself so that anyone you send it to can open the same scenario.
Running a trade-in programme? See how RecommerceIQ supports trade-in pricing.