One of the downsides of a car lease is the limited amount of mileage permitted. Typically, leases allow 10,000 miles per year, which for many drivers these days, is simply not enough. Broken down, 10,000 miles is only about 830 miles a month, or 28 miles a day.
If you commute to work everyday, and enjoy the occasional road trip, there’s a decent chance you’ll go above your mileage allotment, thereby incurring a penalty when you return the vehicle. It’s for this reason that you need to determine how much you’ll be driving the car before making a deal with the financing company.
Financing companies limit mileage because excessive driving lowers the value of the vehicle for obvious reasons. That’s why financing companies impose costs for extra mileage. In your contract or in advertisements for car leases, you should see the cost per extra mile driven, expressed in cents, usually in the fine print. So it may cost 10 or 12 cents per additional mile over your limit, which is collected when the vehicle is returned to the dealer at the end of the lease term. There is no definitive number, as they vary by make, model, company, etc.
Let’s look at an example:
Mileage Allotment: 12,000/year
Overage Total: 10,000 miles
Cost per additional mile: 10 cents
In the above example, if you drove your car 10,000 more miles than permitted, you would owe a costly $1,000 when you retuned the vehicle to the dealership. Fortunately, you can select a higher annual mileage allotment with the dealer prior to signing your lease. And if you do so upfront, you’ll get those miles at a lower rate, often at the half the price. So if you know you’re going to drive the car a lot, it’s best to pay for the extra mileage upfront to avoid costly overages down the road. It will only bump your monthly lease payments by a small amount.
If you know you’re going to drive the car more than 15,000 miles a year, which is the typically the highest number of miles you’ll get annually with a lease, it may make more sense to buy. If you’ve gone well above your allotted mileage, you can consider selling the car if the value is right or buying it from the dealer if you actually want it and would like to avoid those extra fees.