At the end of a truck lease you usually have a set of choices: pay the residual and own the truck outright, refinance that residual over a new term, return or trade the truck, or roll into a fresh lease on a newer unit. The right move depends on the truck's value against the residual and your plans. Overdrive's Simon Kendrick compares 80-plus lenders to structure whichever path suits, with figures indicative and subject to lender assessment.
Key highlights
- You can pay the residual and keep the truck outright
- The residual can often be refinanced over a new term
- Returning, trading or upgrading are also common options
- Overdrive compares 80-plus lenders for whichever path you choose
Overdrive is a specialist truck finance broker comparing 80+ banks and non-bank lenders on one application. Compare truck finance options or get a free quote in minutes.
Understanding the residual
Most truck leases and chattel mortgages with a balloon finish with a lump sum still owing, known as the residual or balloon. It is set at the start of the term to keep monthly repayments lower, on the understanding that the truck will hold some value at the end. When the term finishes, that figure falls due, and how you handle it is the real decision. The first step is to compare the residual against what the truck is actually worth now, because that gap, positive or negative, shapes which of your options makes the most sense.
Paying it out or refinancing
If you want to keep the truck and have the cash, paying the residual leaves you owning it outright, with no more repayments. If the cash is better used elsewhere, the residual can often be refinanced over a new term so you keep the truck without a large one-off payment. Refinancing spreads the cost but adds interest, so it suits owners who want the truck to keep earning while preserving working capital. Rates start from around 6.55% p.a. for strong deals, higher for lower-doc, older or cheaper trucks; figures are indicative and subject to lender assessment.
Returning, trading or upgrading
If the truck no longer fits your needs, you can trade or sell it. Where its value exceeds the residual, that surplus is yours and can go towards the next truck. Where the residual is higher than the value, you would need to cover the difference. Some lease types allow the truck to be returned, subject to condition and any agreed terms. Many operators simply upgrade, using any equity as a deposit on a newer unit and starting a fresh term, which keeps them in a reliable truck without a large lump-sum payment.
Planning ahead of the end date
The worst time to think about a residual is the week it falls due. Reviewing your position a couple of months out gives room to line up finance, get a realistic valuation and compare your options without pressure. It also lets you time an upgrade while the truck still holds solid value. Simon compares 80-plus lenders across all these paths, and for eligible applicants pre-approval and settlement can move quickly, so the residual becomes a planned decision made on your terms rather than a last-minute scramble at the deadline with your options narrowing.
Got a truck lease coming to an end? Send Simon the residual figure and the truck details, and Overdrive will compare 80-plus lenders so you can choose the path that suits your business.
Frequently Asked Questions
Do I have to pay the residual in cash at the end of a truck lease?
Not necessarily. You can pay it in cash to own the truck outright, or the residual can often be refinanced over a new term so you keep the truck without a large one-off payment. Refinancing preserves working capital but adds interest. The best choice depends on your cash position and plans for the truck.
What if my truck is worth less than the residual?
If the truck's value is below the residual and you want to move it on, you would need to cover the shortfall, either in cash or, subject to lender assessment, rolled into new finance. If you plan to keep the truck, refinancing the residual spreads the cost. A current valuation shows exactly where you stand.
Can I upgrade to a new truck at the end of my lease?
Yes, and many operators do. If your truck is worth more than the residual, that equity can go towards a deposit on a newer unit, and you start a fresh term. Simon can coordinate paying out the old lease and settling the new finance together, so the changeover is clean and you are not off the road.
When should I start planning for the end of my lease?
A couple of months before the end date is ideal. That gives time to get a realistic valuation, compare lenders and line up finance without deadline pressure. It also lets you time an upgrade while the truck still holds value. Leaving it to the final week limits your options and can force a rushed decision.
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