When a vehicle gets older, it depreciates in value, and the more miles it has on the clock, the greater the depreciation. When you begin a lease agreement on a new car or van, you agree to a set mileage allowance over the period of the lease with a cost built into your monthly cost agreement. The higher your mileage allowance, the greater the cost.

The reason the annual mileage allowance is there is so that the finance company that funds your lease vehicle can estimate a resale value on your vehicle once the lease period is over. What if you go over that mileage agreement? This is when excess mileage charges come into play.

What are excess mileage charges?

Excess mileage charges are the fees that you will pay to the finance provider if you go over your pre-agreed mileage allowance. The excess mileage charge is calculated at a pence per mile rate. This means that the more you go over your pre-agreed mileage, the more it will cost you in excess mileage charges.

How are excess mileage charges calculated?

Excess Mileage charges are set by the Finance Provider and are calculated based on several factors including:

• The make and model of the vehicle
• Your total pre-agreed mileage
• The financial provider who funds the vehicle
• Whether vehicle maintenance is included
• The total mileage amount on the vehicle at the end of the contract.

It is worth knowing that some finance providers have tiered excess mileage. This means that you will be charged one excess mileage rate for any miles up to a set point, then another rate for anything beyond that

Excess mileage charges vary from finance provider to finance provider but typically range from around 3p per mile to 30p per mile.

As excess mileage charges vary it is crucial that you check the charges before you sign your finance agreement. You will be advised of your excess mileage charges upfront and this will appear on your contract.

How much mileage should I choose for my lease?

When choosing your new vehicle, one of the crucial things to consider is how many miles you cover per year. It is important that you choose a mileage that reflects your driving habits because if you exceed your chosen mileage you will be liable to pay excess mileage charges.

The mileage choice you select is completely down to you. If you are confident that your driving habits are likely to remain unchanged from the previous couple of years, the difference between the mileage amounts stated on your recent MOT certificates will give you a fair idea of the mileage you are likely to need.

You could also measure your annual mileage based on how many miles you do in an average month and multiply it by 12. It is best to make the average over a year due to things like how you may drive more in winter due to the weather being poor, but less in summer. These are things to consider when you are estimating your annual mileage.

What will happen if I exceed the agreed annual mileage on the contract?

If you exceed the mileage allowance you have agreed, you will be charged at the agreed excess mileage rate per mile.
For example, if the excess mileage stated in your agreement is 5p per mile, and you exceed your mileage allowance by 1000 miles, you will be charged £50 at the end of your lease

How do I know what the excess mileage charge is for my chosen lease deal?

When you lease a vehicle with Alphalease, the excess mileage charge will be on your quotation that we send out to you. It will also appear on your finance agreement so please ensure you are happy with the charges that apply to your deal before you sign the agreement.

What should you do if you think you are going to exceed your mileage allowance?

During the term of your lease contract, circumstances may change which mean you are now covering more miles per annum than you were when you signed the contract for your agreement. This could include things such as a new job which means a further commute or moving home. If this is the case, do not worry, we are able to extend your mileage allowance.

A mileage extension is a formal change to your lease agreement which allows you to increase the annual mileage allowance. If this is approved the finance provider will issue you with new documentation confirming the mileage amendment and calculate a new monthly rental

Please note that not every finance provider will be able to do this, therefore it is important to select an appropriate level of annual mileage before you sign your agreement.