How to Avoid Paying Excess Mileage Charges on Your Lease

An excess mile charge on a leased car is a fee that is charged when the person leasing the car exceeds the predetermined mileage limit specified in the lease agreement. When you lease a car, you typically agree to a set number of miles that you can drive over the lease term, such as 10,000 or 12,000 miles per year.

If you go over the allotted mileage, the leasing company or dealership will charge you an excess mileage fee for each mile you drive beyond the agreed-upon limit. The excess mileage charge is usually expressed as a per-mile rate, such as $0.15 per mile. The specific fee amount can vary depending on the leasing company and the terms of your lease agreement.

It's important to carefully track your mileage during the lease term to avoid exceeding the mileage limit and incurring additional charges. Consider calculating the average miles per week or month you can drive to ensure you will not go over your mileage limit.

If you know you're likely to exceed the mileage limit, you may want to negotiate a higher mileage allowance or consider paying for additional miles upfront when signing the lease to potentially lower the per-mile rate.

How is excess mileage calculated

Each leasing company will predetermine the excess mileage fee and include it in the terms of your leasing agreement. Typical excess mileage fees are around $0.15 to $0.30 per mile. The considerations when determining the fee include variables such as the make and model of the vehicle, whether vehicle maintenance is included, and the total mileage amount on the vehicle at the end of the contract. 

Leasing companies impose mileage limits for the following reasons: 

• Residual value - When a leasing company determines the monthly lease payments for a vehicle, they take into account the expected depreciation of the car over the lease term. Mileage directly affects a vehicle's depreciation, as higher mileage generally leads to more wear and tear on the vehicle. By setting mileage limits, leasing companies can better estimate the vehicle's residual value at the end of the lease term and factor that into the lease pricing.
• Resale value - Leasing companies typically sell off their leased vehicles in the used car market after the lease term ends. Higher mileage can negatively impact the resale value of a vehicle, as potential buyers often prefer lower-mileage cars. By limiting the mileage, leasing companies can help maintain the resale value of the leased vehicles, which is important for their profitability.
• Risk management - Leasing companies take on a certain level of risk when they lease out vehicles. Higher mileage increases the likelihood of mechanical issues, maintenance costs, and potential accidents, which can impact the vehicle's value and require repairs. By setting mileage limits, leasing companies can decrease these risks and avoid excessive wear and tear on their vehicles.
• Lease term alignment - Leasing companies structure their lease terms based on the expected usage of the vehicle. For example, a three-year lease might be designed with a certain mileage allowance per year. By setting mileage limits, leasing companies aim to align the lease term with the anticipated usage, ensuring that the vehicle is returned at the end of the lease with reasonable mileage for its age.

Yes, it is possible to negotiate for a higher mileage limit during your lease. Leasing companies understand that different individuals have varying driving needs and may be willing to accommodate those needs by adjusting the mileage limit. However, whether or not they are willing to negotiate and the extent to which they are flexible can depend on several factors, including the leasing company's policies, the specific terms of the lease agreement, and your individual circumstances.

An average mileage limit for a one year lease is 10,000 - 15,000 miles per year. For a three year lease, you can expect up to 100,000 miles as a typical mileage limit. 

If you know ahead of time that you will be driving more than the average limit, you may look into a high-mileage lease. These leases allow a higher mileage limit between 18,000 to 20,000 miles per year. While high-mileage leases may seem to cost more, it may be less expensive in the long run when compared to paying the excess mileage charge. You may even get a reimbursement if you do not actually meet the limit. 

To avoid paying excess mileage charges on a lease, take these steps to continue driving without paying a hefty fee: 

Estimate your mileage needs accurately

Before entering into a lease agreement, carefully consider your anticipated annual mileage and choose a lease term and mileage limit that aligns with your driving habits. Be realistic about your driving patterns to ensure you stay within the allotted mileage.

Opt for a higher mileage limit or high-mileage vehicle

If you know that you will be driving more than the standard mileage limit offered by the leasing company, consider negotiating for a higher mileage limit upfront. This can help prevent excess mileage charges if the leasing company agrees to your request. Alternatively, you can also see if the leasing company has designated high-mileage vehicles that cater to those who have higher mileage needs.

Monitor your mileage regularly

Keep track of your mileage throughout the lease term to stay aware of your usage. This can be done manually by recording your mileage periodically or by using apps or devices that track your mileage automatically. By monitoring your mileage, you can take action to stay within the allowed limit.

Plan your driving wisely 

If you notice that you're approaching the mileage limit, consider adjusting your driving habits. Carpooling, using public transportation, or utilizing delivery services can help reduce your mileage. Additionally, consider renting a vehicle for longer trips instead of using your leased car, especially if it would significantly increase your mileage.

Explore mileage forgiveness programs

Some leasing companies offer mileage forgiveness programs that provide a buffer for exceeding the mileage limit. These programs often allow you to carry forward unused miles from previous years or provide certain allowances for exceeding the limit without incurring charges. Check if your leasing company offers such programs and inquire about their details.

Purchase or negotiate additional mileage upfront

If you anticipate exceeding the mileage limit, you may have the option to purchase additional mileage upfront at a discounted rate. This can be more cost-effective compared to paying excess mileage charges at the end of the lease term.

When leasing a vehicle, not only are there excess mileage charges to be aware of, but the following charges may also apply.

• Acquisition fee - Also known as a "bank fee" or "origination fee," this fee covers administrative costs related to initiating the lease. It is typically a one-time fee payable at the beginning of the lease.
• Security deposit - Some leasing companies require a security deposit, which acts as a form of collateral in case of damage to the vehicle or lease violations. The deposit is usually refundable at the end of the lease term, as long as you comply with the terms of the agreement.
• Wear and tear charges - At the end of the lease term, the leasing company will inspect the vehicle for any excessive wear and tear beyond normal use. If there are damages or excessive wear, you may be responsible for paying for repairs or restoration costs. The specific wear and tear guidelines should be outlined in the lease agreement.
• Disposition fee - This fee is charged when you return the leased vehicle at the end of the lease term. It covers the costs associated with inspecting and preparing the vehicle for resale. The disposition fee is typically a predetermined amount specified in the lease agreement.
• Early termination fee - If you decide to terminate the lease before the agreed-upon term, you may be subject to an early termination fee. This fee compensates the leasing company for the loss incurred due to the early termination.
• Taxes and registration fees - Depending on your location, you may be required to pay applicable taxes and registration fees. These costs vary based on the region and local regulations.

It is easy to see that the price of a lease is not the entirety of the price when the above fees are taken into account. This can make it difficult to actually compare prices or know if leasing is a more economical option to purchasing a car. 

However, another option is a FINN car subscription. With a car subscription, you get the same benefits of low-commitment when leasing a car. You can be sure the price you see is all-inclusive per month with FINN.