Exceeding your miles on a car lease could lead to paying more when you return the vehicle. Leasing companies charge by the mile, which can add up quickly. Here are four options to explore.
Car rental excess mileage charges
Leases have mileage restrictions. This is mainly because leasing companies want to control the amount of depreciation (loss in value) suffered by their leased vehicles during the term of the lease. Typically, leased cars have mileage limits of around 12,000 per year, or 1,000 miles per month.
If you go over the miles it could cost you a pretty penny. Many leasing companies charge between $ 0.15 and $ 0.30 per additional kilometer. It doesn’t sound like a lot, but it can add up quickly. If you drive over 1,000 miles, it could cost you around $ 150 to $ 300 when you return the vehicle to the dealership.
Here are some options to consider before going over your allotted miles, and some to consider if you already have them:
1. Buy additional miles on departure
Leasing companies often allow tenants to purchase additional kilometers, but usually only at the start of the lease. If you are a renter who knows that you are going to exceed the usual mileage limit then it is a good idea to purchase additional miles while terminating the contract. The hindsight is 20/20, however, if you’re not sure how many miles you need, think twice, as additional mileage purchases are not refundable.
This means that you don’t get money back for the extra miles you buy if you don’t use them. If you don’t go over, the only thing that happens is you don’t pay mileage charges. Leasing companies do not reimburse to stay under the limit. If you’re planning on renting again, figure out how much you’re driving so you don’t overbuy miles or underestimate how many you’re driving – miscalculation can cost you dearly.
2. Keep the mileage of your trip
If you’ve already exceeded your mileage limits and your lease has not ended, consider paying for alternate transportation or using a family member’s car to reduce your lease mileage. Since the start of the pandemic, many people have been working from home. If this is an option for you, it may be worth considering reducing the mileage driven.
Many people also use taxi and / or carpooling services to get around. If the cost of someone else’s ride or using a carpooling service is less than your expected excess mileage charges, this might be a good option to consider.
3. Buy the car
If you buy the leased vehicle at the end of the lease, you don’t have to pay for those extra kilometers. Keep in mind that leasing companies impose mileage limits so they can control depreciation, usually with the intention of selling the previously leased car as a Certified Pre-Owned Vehicle (CPO). But if you buy it, you can say goodbye to excessive mileage charges. This is a good option to consider if you are exceeding the limit excessively. Your lease contract must include the purchase price of the leased car.
4. Start saving for fees now
If you’ve already driven more miles and don’t want to purchase the vehicle, it’s a good idea to start saving for the extra costs now so you don’t have to scramble to pay off the costs at the end of the lease. As we mentioned, leasing companies can charge you up to $ 0.30 per additional mile. Review your rental agreement to see what your rental charges are for excess mileage charges so you can plan accordingly.
Leasing vs Financing
If you are a frequent driver and drive miles, financing a vehicle may be more your speed. Many borrowers choose to lease rather than finance because monthly lease payments for a new car tend to be cheaper than financing a new vehicle. But if you always have to buy extra miles because you drive a lot, you might not save a lot of money overall.
Auto financing can also be an easier route for borrowers with bad credit. Many leasing companies require borrowers to have a good credit score to qualify, typically requiring a credit score above 660 or maybe in the 700s. If your credit score isn’t good, you you may be more likely to qualify for a car loan than a lease.
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