Residual value is the estimated remaining economic value of an asset or portfolio after a defined period — end of lease term, project life, or fund vintage — when earlier cash flows or depreciation are accounted for.

How it works

In equipment finance, lessors model residual to set payments — if a truck is worth 40% after five years, that salvage value reduces monthly lease cost. In venture fund accounting, residual value sometimes describes unrealized holdings: NAV minus distributions, i.e., what is still marked on the books pending exit. /glossary/realized-value plus residual NAV composes total value; TVPI combines both relative to paid-in capital.

Marks on residual holdings move with rounds, comparables, and GP judgment — unlike realized proceeds.

Why it matters

• Founders: Lease residual guarantees can create surprise balloon payments if asset values fall.
• Investors: LPs discount stale residual marks in aging funds; DPI proof reduces reliance on residual NAV.
• Project sponsors: Overstated residual makes projects look bankable until sale reality bites.

Common mistake

Treating fund residual NAV as cash LPs can count on tomorrow. Until realization, residual value is estimate-heavy and can markdown sharply.

Related ideas

/glossary/realized-value, /glossary/paper-gain, NAV, TVPI, and salvage value.