One of the key considerations when taking out a lease is mileage, as the payments are based on a fixed annual allowance. Exceeding this annual allowance will result in an excess mileage charge, which varies depending on the vehicle, model and manufacturer. Our handy guide breaks down yearly mileages and excess mileage charges to help you keep on top of your leasing costs.
One of the key considerations when taking out a lease is mileage, as the payments are based on a fixed annual allowance. Exceeding this annual allowance will result in an excess mileage charge, which varies depending on the vehicle, model and manufacturer. Our handy guide breaks down yearly mileages and excess mileage charges to help you keep on top of your leasing costs.
The total cost of your lease is determined by several factors; the value of the car, the estimated residual value at the end of the agreement, your annual mileage allowance, and the length of your lease. The mileage allowance you choose directly impacts your monthly payments, so it’s important to choose an amount that reflects your driving habits as accurately as possible. To work out your annual mileage, start with the fixed trips you’re likely to cover over the length of the agreement. If you’re a delivery driver who commutes 20 miles each way five days a week, that equates to around 10,000 miles per year.
For every mile driven for business purposes, there may be another you need to cover in your personal time. Take into account any other long journeys you’re likely to make – whether it’s travelling home for the holidays or across the country for an annual business conference. If you are confident that your driving habits will remain the same as previous years, the difference between the mileage recorded on your recent MOTs will give you a rough idea of the annual allowance you’re likely to need.
Your annual mileage limit will be agreed between you and the hire company before you take out the contract. At AMT, the mileage bands can be from 5,000 up to 50,000 miles depending on the funder.
The price you will pay when you go over the agreed mileage limit will be outlined in your original quotation, lease contract and official finance document. Any excess mileage is charged in pence per mile – for example, if the excess was 5p per mile, then you’d be charged £50 for going 1,000 miles over contract.
Typical mileage charges are around 10p per mile, although some car leasing companies can charge as little as 5p per mile and others more than 30p. At AMT, a personal leasing contract has an excess charge of 10.8p per mile, while a business leasing contract has 9p. These mileage costs vary depending on the vehicle. It’s important to double check the excess charges before setting your mileage allowance – the higher the excess charges, the more sensible it is to go for a higher-mileage contract.
It’s not recommended to go for a lower mileage allowance to reduce monthly payments, however, as the excess mileage charges will soon add up. For example, leasing a Volvo XC40 Estate for a three-year personal contract with a 30,000 mileage allowance and 6 month deposit would cost £12,515.64 overall. While a lower allowance of 24,000 miles would result in an overall cost of £11,997.42, the excess charge for going 6,000 miles over this limit would equate to £648 – actually costing you £129.78 more.
This depends on the hire company. While most companies display figures including VAT, others may show the charge before VAT and mark it with asterisks. If that’s the case, you need to add 20% to the quoted figure to reveal the full amount you’ll be charged for going over the mileage allowance. You should clarify exactly what the fees are in black and white before agreeing to the contract.
Not all companies are transparent about excess charges, but at AMT our charges are clearly outlined in your contract and the official finance document. Our pence per mile costs exclude VAT for business leasing, while our personal leasing contracts include VAT. This is because businesses don’t pay VAT on leasing contracts.
If you know you’re going to go over your agreed allowance, you should contact your hire company well before the end of the contract to increase your mileage limit. It’s important to remember that your mileage allowance can be divided across the contract period to suit your requirements, as it’s the mileage at the end of the contract that counts, not at the end of each year. For example, if your allowance is 30,000 miles over three years, you can drive 12,000 miles one year, 10,000 the next and 8,000 miles during the final year.
If you’re looking for a new lease vehicle, contact our dedicated team today to discuss your annual mileage requirements.
