For all its benefits, leasing a car also comes with stipulations and limitations. One in particular is the mileage limitation. That you are wondering whether it is possible to extend the mileage on your lease means you are concerned. Many people find themselves in similar situations. Some may not find out that they have exceeded their limit on miles until the lease ends.
The following information might prove useful if you want to avoid this costly surprise before returning the car to the leasing company.
Why do Car Leases Have Limitations on the Mileage?
First, it may help to understand why mileage limitations are part of your car lease agreement. Generally, age and the more cars are driven cause the value to depreciate. Your lease payments are based on the expected depreciation as you drive. This represents the residual value when the lease ends.
During a 36 month lease, for instance, a car is not expected to be driven above 36,000 miles. The lease-end residual value would be higher than the same car at 45,000 miles.
Allowances for lease mileage are considered annual miles. Leasing companies do not check the miles driven each month. The total miles driven when the lease ends is what counts and what needs to be managed.
What Happens if You Exceed Your Mileage Limit?
Charges for exceeding your mileage limit are not penalties. Rather, the charges are to compensate the lease company for a higher depreciation and lower residual value when the lease ends, which is different than the original agreement.
You are charged a per mile rate for the additional depreciation. Mileage fees may vary, but the general rule is broken down as:
• $0.15 per mile for lower priced cars
• $0.20 per mile for mid-priced cars
• $0.25 or more per mile for higher priced cars
• $0.30 per mile for some luxury models
Based on the type of car you are leasing, the rate is specified in your contract and is nonnegotiable.
How to Know if You Exceed the Mileage Limit
To know whether you have exceeded the mileage limit per your contract, you can do a manual calculation. Look at the mileage on the car and divide it by the number of months you have been leasing the vehicle. Any overage is based on the annual allowance in your contract.
You can also use online or mobile applications to track and calculate your mileage usage. These work similar to the manual method, except the computer does the calculations for you.
Either option is a good tool to determine how well you are doing on mileage. Additionally, this can offer some insight on where you will be at lease-end and how much you could owe.
What to Do When You Have Exceeded the Mileage Limit
Once your lease begins, you will not be able to change your mileage allowance. Therefore, if you know that you will need to drive extra miles for business, leisure, etc., you may want to buy additional miles before signing the contract.
If you have already exceeded the miles of your lease, you have several options before the lease ends:
• Carpool, work from home or use public transportation
• Reduce your time on the road by eliminating some trips or consolidating a few trips into one
• Take shorter routes
• Drive a rental for long trips
• Start saving money for the estimated overage charge
• Purchase the vehicle when the lease ends and you will not pay the mileage overage charge.
Otherwise, you can expect to pay a fee for the excess miles. Do your best to stay within your limit now or prepare yourself now to avoid any surprises.