Leasing a car is something that looks attractive to many drivers. With this, you can have lower monthly bills, lower down payments and get a new car every few years. Each lease does come with restrictions and rules that only the lessees will need to follow. Many people miss the mileage cap being among the most costly hidden fees. You could receive severe penalties if you spend above the credit limit.
It is very important to understand what this means to prevent unexpected charges after your lease ends. We can look at it step by step.
Question
Car lease agreements come with a stipulation that you must pay a penalty if you___________.
Options:
A) Miss a car wash
B) Pay the lease early
C) Drive too many miles
D) Get an oil change
Correct Answer: C) Drive too many miles
Explanation
On signing a car lease agreement, you accept to meet the terms stated by the company. Driving the car less often is usually one of the most crucial requirements. For this reason, companies introduce mileage caps.
Extra mileage means additional charges will be charged by the leasing company. The fee covers the wear and tear the vehicle experiences because of heavy use. Driving the car more often causes more damage which can make it harder to sell and lowers its value.
Most lease agreements outline:
- A fixed number of miles allowed per year (usually 10,000 to 15,000).
- An overage fee that ranges from $0.10 to $0.50 per mile, depending on the car and lease provider.
- The total penalty you owe is calculated at the end of your lease and must be paid when returning the vehicle.
Example: Suppose you have a 3-year lease with 12,000 miles allowed per year and you reach 40,000 miles, then you’ve gone over by 28,000. That comes out to $1,000 in charges for going over your limit, since you pay $0.25 for every mile.
You need to check your mileage often while you have the car under lease. Assuming you’ll drive farther than you really will help prevent extra charges when you return the car.
What is a Mileage Cap?
Mileage cap (or mileage limit or allowance) referees to the highest amount of miles you can drive during the term of your contract. It is a crucial part of leasing and it greatly affects whether leasing is suitable for you.
The following points outline the main ideas about mileage caps:
- Allowed Or Set Limits: Several leasing companies include limits between 10,000 to 15,000 miles/year.
- Prepaying Extra Miles: You can often purchase extra miles at a lower rate before signing the lease, which helps avoid higher overage fees later.
- Unused Miles: If you drive fewer miles than your cap allows, you generally don’t get a refund or credit.
- Custom Mileage Leases: Some companies offer high-mileage lease options (18,000–20,000 miles/year) for drivers who travel more often, though monthly payments may be higher.
FAQs
Q1. Can I increase my lease mileage limit after signing the contract?
This type of change cannot usually come from leasing providers during the contract. A tenant can usually only ask for it while the lease is still very new. Prepare a rough estimate of how much driving you’ll do while on vacation.
Q2. What happens if I go over my mileage limit?
You must pay for every mile you go in excess of the limit you agreed on. You can see the cost per extra mile in your lease agreement, and this charge is expected when returning the car.
Q3. Is it cheaper to buy extra miles upfront?
Yes. Most of the time, if you buy extra miles at the start of your lease, the cost is lower than getting charged per mile when you return the car.
Q4. Can I avoid mileage penalties?
Absolutely. Falling below the agreed mileage is ok, you can pay extra for more or buy the vehicle as the lease ends if unexpectedly driving more leads to fees.
