Car Leases & Mileage Penalties

Car leases appeal to a lot of consumers because they come with lower monthly payments than buying, which means you can get into a nicer car for less money. Some leases end happily ever-after, but your car lease could turn into a nightmare fast if you run into mileage issues. All car leases limit the amount of miles you can put on the car, and if you go over that number, the cost of driving can go through the roof fast.

Car Leases and Mileage

Whenever you sign a car lease, part of the agreement will be a limit to the number of miles you can put on the car. Twelve thousand miles per year is a typical number, but deals do vary. To figure out how many miles you are allowed to put on your car, check your lease agreement for your annual mileage allotment. Multiply that number by the length of your lease to find out the maximum mileage for the lease. Your leasing company won't check the car each year. They will simply check your total mileage when you turn in the car at the end of the lease.

Going Over

The problems start for car leasees when they go over their mileage limits. For every mile you exceed your limit, your leasing company assesses a charge. These charges can be substantial and add up fast. Although charges vary between companies, anything from 10 cents to 20 cents per mile is common. Check your lease agreement to find out your excess mileage charge.

Avoiding Charges

If you inked the contract agreeing to the mileage limits and the penalties, then you are on the hook for honoring the deal. There are a few things you can do to mitigate a mileage disaster, however. Of course, reduce your driving as much as possible. You could consider a lease swap through a company like LeaseTrader.com (see Resources). You will need the okay of your leasing company, which will also have to approve the person taking over the lease. This will get you out of the lease and off the hook for your miles. Buying your car at the end of the lease is another option, though whether or not this is a good deal depends on a number of factors, including the depreciation of the car and the amount of money you put down.

If you elect to extend your lease, start a new lease on a new car or buy a new car with the dealer who holds your original lease, you may be able to negotiate away some or all of your mileage excess fees.

Should You Lease?

How many miles you drive has an enormous impact on whether leasing is right for you or not. If you have a long commute or travel regularly, then you are likely to go over the mileage limit and face significant fees at the end of your lease. If you think that the mileage will be an issue for you, try negotiating for extra miles or consider buying instead.