What Is The Percentage Of List: Explained
The ‘percentage of list’ is the difference between the capital cost (OTR price) and the Residual Value (RV). This shows, at a glance, exactly where value is attributed as a percentage. The lower the number, the better the percentage of list. This is usually a good indication of “value for money”.
Looking at the percentages within the graph below, you can see that they run anywhere between 25-29% or so for a 2 year lease, up to 33-37% on a more realistic 3 year lease.
This means you will be paying between 25% to 29% of the total value of that vehicle before you hand it back. You can pay substantially more depending on which model you pick if it is undesirable in the 2nd hand market…
Car leasing companies normally don’t read the percentage of list in this way, they actually read it in the opposite way. They would say that the vehicle has 65% of its value left, not that someone would spend 35% of the vehicle’s value.
This is because they want to know what the value of the vehicle is at the end of its lease and make any adjustments where necessary from a financial risk perspective. Just makes the calculation easier on their end.
The percentage can give you a good indication of “value” but it also needs to be double-checked against the ‘On The Road’ price. Otherwise, a Ferrari would look like good value for money if we didn’t double-check the overall price and only looked at the percentage of list…
*miles per annum (e.g. 24m / 20k = 40,000 miles)
Is This Why Residual Values Are So Important?
Yes. The RV is the price/value that’s assigned to a vehicle at the end of its useable life.
From a leasing perspective, the end of its useable life is at the end of its contract term, be it 36 months/48 months etc.
A leasing company is simply going to sell that vehicle at the end of the term, and it’s going to have another life with another customer.
Specific optional or standard equipment and/or combinations are assigned a ‘value’ at a particular point in the vehicles life, the more meaningful the items, the more residual value is assigned to them.
Always try to pick vehicles with desirable 2nd hand specification (leather seats, climate control etc). This will provide you with a vehicle that should fulfil your ownership needs, whilst also minimising the financial risk to a leasing company/bank.