Residual value (RV) is usually misunderstood. It is a contractual amount and is the monetary value that will not be amortized during the lease. Sometimes the RV is intentionally overstated in order to reduce payments, sometimes is understated to reduce lessor risk. Lease fine print established whether there is or is not a lessee buyout amount specified at lease end, as well as terms for early termination. Option to buy at RV is often included but some state the greater of RV or Market Value.
Tesla originated leases are more straightforward than are most but many Model 3 leases have no provision for lessee buyout, and other models have had different practices.
For commercial leases, including any lease with capitalized cost higher than $50,000 the exact terms for vehicle disposition or lease termination following damage or total loss, the terms are often quite ambiguous but almost always have total liability with lessee. It is wise to read those terms carefully and also buy extra coverage from the lessee's insurance provider.
As posters above note, beware GAP coverage. Sometimes that is beneficial, but mostly it is just a way to extract an extra fee.
Regardless there is no substitute for reading the fine print.
As a general rule leases are the most expensive financing option unless the lease payment can be deducted as a business expense.
Practices vary quite dramatically from jurisdiction to jurisdiction.
The US Consumer Protection Act applies to leases with a maximum Capital cost of $50,000 so most Tesla leases have zero consumer protections.
The code is here. For reference, there are several parts of the act that have incorrect nomenclature. The stellar item is "estimated residual value", which by definition does not exist since "Residual Value" is the contractual remaining capital cost at contractual lease end. "Residual Value" and "Resale Value at Lease Contractual Termination" are equal only in rare circumstances.
FWIW I have leased many vehicles and other property and have also designed a few lease products for captives.I have leased ONLY when the payment could be deducted as business expense, excluding MACR eligible, in which case I paid cash for purchases. I have also for every lease been careful to assess early termination conditions. Early terminations in the US are roughly 60% of all leases and they are invariably immensely profitable to lessor.
But hey, what do I know.
