More Information about Excess Mileage Charges

Most leases limit the number of miles you may drive (often to 12,000 or 15,000 miles per year) without an additional charge. Vehicle leases include a mileage allowance because the residual value is based on the expected mileage. Driving more miles often reduces the value of the vehicle. You will likely have to pay charges for exceeding the limit if you return the vehicle. Generally, excess mileage charges are the way that lessors try to recover the expected decrease in value resulting from the additional mileage.

To reduce or eliminate end-of-term excess mileage charges, consider negotiating the lease to include the extra miles you expect to drive above the mileage proposed by the lessor. The lessor should reduce the residual value to reflect the higher expected mileage. This reduction would increase your monthly payment and should decrease or eliminate the end-of-term charge for excess miles. Some lessors refund the charge for extra miles you purchase above 15,000 miles per year if you don't drive the extra miles. If the lessor has this refund policy, it should be in the lease agreement.

Excess mileage charges can range from 10 cents to 25 cents per mile or more. The higher charges are often on more-expensive vehicles because the decline in value caused by excess miles is generally greater for more-expensive vehicles than for less-expensive vehicles.

It often costs less for you to negotiate a higher mileage limit in the lease than to pay for excess miles at the end. Increasing your mileage limit, and thus your monthly payment, can reduce or eliminate large (and often unbudgeted) end-of-term expenses. It also should reduce the total rent charge because the rent charge depends on the lease balance and a lower residual value reduces the average lease balance. Example