Car leasing: Excess mileage charges explained

05/08/2021

Car leasing: Excess mileage charges explained

If you are considering car leasing as an opportunity to drive a new car but have questions about excess mileage charges, then this article is for you.

For many people, leasing a car is an affordable way to get behind the wheel of a new car for a reasonable amount.

You don't have to pay the entire cost of a new car upfront, and you simply pay an amount every month.

When your car leasing agreement ends, you simply return the car to the leasing company and decide whether you want to lease another car.

However, the car leasing company will be checking for any damage that may have been caused to the vehicle and whether it comes under their fair wear and tear guidelines.

If not, you will be handed a repair bill.

The same principle applies to excess mileage charges and if you go over your agreed mileage limit, you will be issued with a charge per mile.

This excess mileage charge when you lease a car will vary between companies from just a few pence and potentially up to 30p per mile.

That means you could be handed a hefty bill for exceeding your agreed annual mileage limit.

We explain later how you should determine what your annual mileage will be.

 

What are car leasing excess mileage charges?

It's important to appreciate that when you lease a car, that the excess mileage charge will cover the lower value of the vehicle because of the extra mileage.

Essentially, when you lease a car and if you are driving lots of miles, then your monthly payments will be more.

It's for this reason that some people may decide that they will agree to a lower annual mileage limit so they can enjoy lower monthly payments.

However, it's important to appreciate that the person picking up the car will be checking the mileage very carefully and if you have exceeded your agreed limit, you should expect to pay for every extra mile you have racked up.

 

How much do car leasing excess mileage charges cost?

A car leasing company will tell you what their excess mileage charges are when you determine what your annual mileage allowance will be.

It's important that you know what the excess charge is before signing a car leasing agreement, and if you can't find it in the contract, then ask the leasing company how much they are charging so you will know when you have exceeded your mileage limit.

As mentioned, these charges do vary from a few pence and up to 30p a mile.

It's likely that the higher charge will apply to more expensive prestige lease cars, so be aware of this fact.

The reason why they are set up in this way is that you will be paying more in an excess charge than you would have done if you had agreed to a higher mileage allowance upfront.

Again, check what the excess mileage charge will be and if you're unsure about how many miles you should agree to drive every year, then consider increasing that limit.

For example, if you agree to a mileage limit of 8,000 miles a year but drive an extra 4,000 miles then a car leasing firm that charges 4.5p per mile as an excess charge will give you a bill for £720.

However, if you had agreed to a 12,000 miles limit, the difference in paying more every month could be as low as £230.

 

Leasing a car: Calculating your annual mileage limit

To avoid excess mileage charges when leasing a car, you should focus on how many miles you drive every year as accurately as you can.

You can do this by working out how many miles you drove in a previous car, or if you have leased previously, how many miles you covered when the company collected it.

This is a good starting point for calculating how much your annual mileage will be every year and help you access great car lease deals.

This becomes trickier when you believe you will be travelling more miles in future, for example, you may be commuting to a new job.

There's a fairly simple formula to calculate your annual mileage, and if you travel 100 miles per week for commuting, that works out at 5,000 miles every year.

That's just travelling to work and if you calculate how many miles you travel every month to visit friends and family, that could easily add up to another 5,000 miles every year.

That means your annual mileage is 10,000 miles, but to be on the safe side you could add 10% to that figure to help protect against those unexpected trips.

If you are leasing a new car because you want to enjoy the features or will be driving more miles, then you could use Google Maps to calculate how long your regular journeys will be, as well as those extra trips to see family and friends.

You could do this monthly calculation, then multiply that figure by 12 to work out what your annual mileage limit will be.

It's worth bearing in mind that car leasing firms have a range of annual mileage figures to choose from, for example, with Tilsun leasing the annual mileage figures start at 5,000 miles and rise incrementally to 30,000 miles.

 

Car leasing: When you are going to exceed the annual mileage allowance

It's one thing agreeing to an annual mileage limit when leasing a car, but if you know that you are going to exceed it, is it worth contacting the car leasing company?

The answer is 'Yes' because it is possible to increase your allowance which will inevitably lead to a slightly higher monthly payment.

This call will be worthwhile since agreeing to a higher monthly payment will mean you avoid a hefty end-of-contract excess mileage charge.

Don't forget too that your annual mileage will extend over the entire leasing agreement.

So, if you agree to a three-year contract with an annual mileage limit of 10,000 miles every year, that means the overall mileage allowed is 30,000 miles.

You can then drive more than 10,000 miles in the first year without incurring any charges - just as long as the car is returned within the 30,000 miles agreement.

 

Correcting a car lease odometer

Finally, a word of warning for anybody who's thinking about correcting the odometer or milometer on a leased car.

There are various firms advertising ways and means to reduce artificially the mileage on your leased vehicle.

These firms may claim that you will avoid excess mileage charges because reducing the mileage will increase the car's value.

However, if you knowingly falsify the mileage figure on a car, you will be breaking the law.

There's no reason to break the law when trying to avoid excess mileage charges when you lease a car, and by understanding what your limit is every year, these charges are easy to avoid.

 

Car leasing: Excess mileage charges explained

If you have any car leasing questions, including those about excess mileage charges, then you should speak with the team at Tilsun Leasing who will be glad to help.

Back to blog

BVRLA
ogilvie
Hitachi
Lex Autolease
Alphabet
ALD
AEVAL
Leasing Broker Federation

Join our Newsletter

Join our newsletter to receive our latest offers & news

First Vehicle Leasing Limited is a credit broker not a lender. First Vehicle Leasing Limited is authorised and regulated by the Financial Conduct Authority. FRN: 670872.

All our calls are monitored for compliance and training purposes.

Address England: First Vehicle Leasing Ltd, Verity Court, Pochin Way, Middlewich, Cheshire, CW10 0GW.

Address Scotland: First Vehicle Leasing Ltd, Enterprise House, Drumpellier Business Park, Glasgow Rd, Coatbridge ML5 1EL

Company Registered in England and Wales No. 4393228 | Data Protection No. Z7014603 | VAT Reg No. 400 8928 64

First Vehicle Leasing 2024. All Rights Reserved