Mileage and Excess Mileage

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Mileage and Excess Mileage

How does mileage work with car leasing?

When you lease a car, you’ll have a mileage allowance added to your contract. This mileage allowance is used to help calculate your overall package, and is used when assessing how much wear and tear you may cause on the vehicle, among other things.

Every deal is unique to the owner, and completely depends on your driving habits and how much you want to pay for the car. It allows the company leasing you the car to calculate a resale value, based on how much the car may have been used. Going over your agreed mileage allowance can introduce additional costs to your agreement, so you’ll want to make sure you agree to a sensible figure.

How many miles allowed on a car lease and how are they calculated?

The actual number of miles varies from driver to driver and depends entirely on your deal. The number is calculated based on previous driving records that you supply, or based on your predicted usage.

It takes into account how you use your car. For instance, are you using it for a commute every day, do you often drive long distances etc. You’ll be provided with an overall yearly figure, for example; 10,000 miles yearly allowance. This yearly allowance is then used for your whole term. So, for a 3 year lease deal, you’ll have a 30,000 mile cap. This means that on years where you don’t reach your 10,000 mile limit, the remaining miles will roll over.

The overall amount will vary depending on what you choose, and choosing a larger limit will generally increase the cost of your lease deal as your car will be subjected to more wear and tear and will likely depreciate more in value.

How much mileage should I choose?

If you are concerned about getting into the specifics of how many miles you are doing per year, don't be. Very few of us have an exact idea of how many miles we drive per year. Of course, your personal circumstances can change from year to year, but we always recommend looking back at any past information you have available. You should be able to find this from either service or MOT documentation to give you the best guess.

Keep in mind what you use your car for, and whether there’s any chance it may change. For instance, are you considering moving further away from work, or are you intending to use it for extensive travelling? On the flip side, if you are expecting to significantly reduce your annual miles driven, you may want to take that into consideration as well.

Naturally, the cost is dependent on the number of annual miles you state on your agreement. Our advisers will always take an impartial approach and help you in the best ways they can, should you have any questions on mileage. Please feel free to ask us about how mileage can impact the monthly rental or the surcharges that can apply. 

How is the mileage tracked? Per year or at the end of the contract?

As we’ve touched on above, while your mileage is calculated on a yearly basis, it’s actually tracked overall for your contract. This becomes your contractual mileage.

What this means is that your yearly mileage allowance becomes a total for your whole contract. For example:

Yearly mileage allowance: 9,000 miles

Length of lease agreement: 4 years

Contractual mileage allowance: 36,000 miles

This means that even if you go over one year, as long as you are under by enough on the other years, you may not have an excess mileage. Similarly, in the years you are under, you can roll those miles over to the following years.

This mileage is tracked during services and MOTs and will also be noted from your car’s overall mileage reading before you drive away with it and after we take it back. This is then when excess mileage is calculated.

What are excess mileage charges?

If the car you are returning has gone over the contractual mileage (multiply the annual mileage with the how many years you'll have the car) then you may be charged on a pence per mile basis. This will be checked on return of your car, and the amount you owe will vary depending on the car you leased, the agreement you had and how far you’ve gone over your allowance.

How are excess mileage charges calculated?

Every contract will have a differing pence per mile cost which will be given to you alongside the quote and once again with the official contract documents.

This will change depending on your contract, but an example would be as follows:

Contractual mileage allowance: 30,000
Miles driven: 32,000
Excess miles drive: 2,000
Pence per additional mile: 4p

Calculation: 2,000 x 0.04

Excess mileage charge: £80.00

What to do if you think you'll go over the agreed annual mileage?

Should you find yourself mid-way through your personal lease or business lease agreement and exceeding the contractual mileage, there are a couple of things you may be able to do.

If you’ve simply gone over in one of your years because of extenuating circumstances then you may be able to reduce how much you drive in the remaining years to even out your mileage use and come under your contractual mileage allowance.

When this isn’t possible, or if your circumstances have changed and your mileage is going to be higher than originally expected, we may be able to help. In some circumstances you can have your contract re-evaluated, and your mileage allowance changed. This is a non-guaranteed service, any changes are at the discretion of the lender and will come at an additional cost to you. 

You’ll want to work out whether the charges on your excess mileage are going to be more or less what a change to your allowance would cost you.

Tips to avoid the end of contract excess mileage charge

Be realistic with how many miles you drive in a year
Check your previous mileage on service information and MOTs, or simply use your car’s mileage clock. Work out how much you normally use, and how much you may drive in the coming years. Keep in mind any chances you have for a change in your circumstances, either way.

Add some extra miles as a safety net
We always recommend adding a buffer to your mileage allowance in case something happens and you drive more than you expect.

Notify the funder of any changes in circumstances
While there’s no guarantee, we may be able to change your mileage allowance in your contract during your agreement, so it’s always worth checking with us if you’re worried about going over.

Should you wish to receive an email with your quote, with all of the costs including excess mileage broken down, we can supply this. If there are any terms of the quote that you are unsure of, we'd recommend you broach these with your designated account manager before signing any agreement.

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