We’ve been getting a lot of questions lately about the mileage allowance on lease cars. To help give our customers all the answers we’ve rounded up all of the questions we’ve been asked and answered them here – in one easy-to-read article!
Your Mileage Questions Answered
Why is There a Mileage Allowance on Lease Agreements?
You will see all lease agreements have a mileage allowance on them, whether it’s an annual allowance or total lease allowance, this is because the mileage a vehicle has an impact on several different aspects for the lease funder.
Firstly, the more miles a vehicle covers the more wear it will have to components like the tyres and clutch will experience, and this is likely to increase the maintenance costs needed.
Additionally, more wear to the vehicle and a higher mileage will reduce the resale value of the car. The resale value is part of the calculation for determining the lease price, which is why increasing the mileage on a quote will increase the cost, and why all lease agreements have a mileage allowance on them.
What’s the Lowest Lease Mileage I’m Allowed?
As all lease agreements require a mileage allowance there is a minimum allowance that you are allowed to take out. For most of our funders, this will be around 5,000 miles though some do set it slightly higher.
It’s important to be aware that the minimum mileage is not a target mileage but if you do under this amount you will not get any financial bonus for not meeting this.
What’s the Highest Lease Mileage I’m Allowed?
The highest mileage allowance will depend on the type of vehicle (car or van), the fuel type and the lease length as funders will use these factors to determine what mileage would be the highest they can offer drivers whilst still getting a return on their investment when they sell the vehicle at the end of the agreement.
We’ve got a dedicated mileage allowance guide and this will break down what our funders are currently advising is their maximum mileage allowance based on these factors.
What’s the Average Lease Mileage?
The average lease mileage we’ve seen our customers choose is around 8,000 to 12,000 miles annually. We did see a dramatic drop during covid but during the last 12 months it has risen and settled with 8,000 and 10,000 miles as the most common lease mileage options.
What Mileage Do Most People Choose?
Over the past couple of years, we’ve found that the most popular mileage allowance amount chosen by drivers is 8,000 miles per annum. The second most common mileage choice is 10,000 followed by 12,000 and 5,000 fairly closely.
Why Does It Cost More to Get a Lease with a Higher Mileage Limit?
If you are covering more miles, then the vehicle will have more wear to it and the resale value will be lower. The resale value is part of the calculations used to determine the leasing cost so if you cover more miles and therefore have a lower expected resale value at the end of the contract then the cost of the lease will be higher.
What Happens if I Go Over My Mileage Limit?
When you sign a lease agreement it will include an overmiles or excess mileage charge. This is usually shown in pence per mile and will be the amount that you pay for exceeding the mileage limit.
One thing to be aware of is that if your lease agreement includes a maintenance package then you will have two charges, an excess mileage charge for the lease itself and a second for the maintenance package.
What Happens if I Hand My Car Back with Less Than My Mileage Limit?
There is no benefit to handing the vehicle to the funder with mileage lower than the limit. If you hand the car back below mileage then nothing will happen for you.
If you are not at the lowest mileage allowance that the funder offers, then you may be able to reduce the contractual mileage to put it in line with your actual mileage during the lease. You will usually need to have a few months left on your contract to be able to make any changes to it.
What is the Cost of Going Over My Mileage Limit?
The cost of driving more miles than you agreed as your mileage allowance will depend on your specific lease agreement. This is because when you sign the agreement you agree to a set overmiles or excess mileage charge. The excess mileage charge will be based on several different factors so will be different depending on the model, contract mileage allowance and contract length / vehicle age.
The excess mileage charge will usually be a pence per miles charge so the exact amount you pay will depend on how many miles you exceed your allowance by.
One thing to consider if you are mid-contract and know you are going to exceed your mileage allowance is that you can amend it. Most funders will not allow you to amend the mileage during the first 12 months, so any changes are based on a more accurate annual mileage. Additionally, several will not allow you to make any changes during the last six months. You should be aware that changing the mileage allowance may have an impact on the monthly payments you may need to sign a contract amendment document before the change goes through.
How Am I Charged for Excess Mileage?
You will only be charged at one point in time for excess mileage – at the end of the lease.
When the vehicle is collected from you the mileage will be noted, and it is this mileage that will then be compared to your mileage allowance to see if you have stayed within your allowance. If you have gone over this mileage then they will issue a one off charge for the excess mileage, and this may be taken using the direct debit details if this is still active.
One thing to note is that if you have a maintenance agreement as part of the lease then you will have two excess mileage charges, one for the lease itself and one for the maintenance package.
How Many People Go Over Their Mileage Limit?
It’s difficult to give an accurate answer to this for a number of reasons, including customers being able to change their mileage mid-contract and do this directly with the funder. We know there is a small percentage of our customers who do end up exceeding their mileage and are charged for this.
We advise our clients to base their mileage allowance on their current annual mileage to try and ensure they do not have any issues with exceeding it or overestimating it and paying a higher lease price. However, there are times when drivers’ circumstances change and so does their mileage and we do see some drivers go over their mileage.
Can I Change My Mileage Allowance?
Yes, most funders will let you make contract amendments during the lease agreement.
You will not usually be able to amend the mileage during the first 12 months of the contract. This is in order to ensure the funder has an accurate prediction of your actual annual mileage.
A lot will also require you to have at least six months remaining on the lease. This is because making a mileage amendment can impact the monthly payment amounts and they do not want to make the lease unaffordable if there is a rise in the total lease cost.
One thing to be aware of is that some funders will only allow you to make one contract amendment during your lease agreement. This means you could not reduce your mileage and then increase it again, so it’s best to make sure that any mileage you choose at the outset is as accurate as possible.
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