Excess Mileage Charges

Excess mileage charges are a common problem many of our clients face when returning a lease. One reason is that they miscalculate their annual commute. Another is their attempt to save money by choosing the minimum mileage when they sign a lease.

Zad Tip: When you are asked how many miles per year you will drive, be as realistic as you can. Excess mileage charges can be very costly on a closed-end lease. It is important for you to understand the difference between an Open End vs. Closed End Lease Agreements.

Excess Mileage Charges:

All closed end car lease agreements contain mileage restrictions. You will normally be allowed to drive 10,000 to 15,000 miles per year during the term of the lease without penalty. If you exceed the mileage restriction, you will be charged 10-25 cents per excess mile.

Open End Lease Agreement:

Normally offered to commercial businesses and individuals who drive an unusually high number of miles each year, 25, 000 miles or more. There is no mileage restriction because the high-mile-age driver guarantees the resale value to the Lessor. At lease end the vehicle is returned and appraised by the leasing company.
If the vehicle is worth less than the residual value stated in the contract, the maximum difference due from the Lessee (customer) is three monthly lease payments. This 3-payment rule only applies to an individual consumer and not to a commercial business. In some states the maximum you could be charged is two monthly payments. You have the right to have an independent third party appraise the car at your expense if you disagree with the leasing company’s appraisal. Because the high-mileage driver guarantees the resale value, the risk is his or hers to take.

Closed-End Lease Agreement:

Allows you to drive the car for the term of the lease, then return it without resale obligation. However, you can be charged fro any wear and tear that is not considered normal, as well as for mileage in excess of the maximum allowed. You’ll also have disposition fee to pay if you don’t purchase the car.

Zad Tip: The closed-end lease is typically offered to consumers by dealerships and most independents. It is the only lease type that you should consider if you drive between 15,000 and 20,000 miles per year.


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