Can you tell me about penalties for going over the lease mileage in a given year? Do you have to maintain the mileage per year i.e. not go over the annual allowable mileage per year? Everyone seems to have a huge concern regarding over km charges on a lease. Keep in mind the km’s you drive have an effect on the value of the vehicle when you return to the lease company – if you don’t buy out the vehicle – so excess km charges are not a penalty, they are a cost for your extra driving over the original contracted allowance. The lease company sets a residual value on a lease – keep in mind you are only paying for the amount of the price of the vehicle you are using in you contract term – and this residual is an educated guess what the vehicle will be worth when you are finished with the vehicle based on the original contract km allowance – usually 16,000/20,000/24.000km per year. The lower or higher the km. you originally contract determines the residual value. So if you drive more than the contracted km. there is a charge which is an adjustment to the original residual value. So, not a penalty just a charge – and a minimal charge at best – for the added km you drive. OK?
An excess km charge only comes into play 1) when you return the vehicle off lease – your lease expiry date – to the lease company and you have exceeded the km allowance. The lease company will assess you based on the excess km. at a charge most common in the range of $0.10 to $0.18 per km. exceeding you contract amount. 2) if you buy the vehicle at the end of the lease, or I sell the vehicle for you, there are no further charges for excess kms. or damage on the vehicle. OK?
Also, IF you know the kms’ you will be driving, you can buy extra km’s initially on your lease. This will adjust the residual lower – the vehicle is worth less with more km’s – which will increase you monthly payment. – you are paying off more of the price of the vehicle. In this case you are paying for your excess km over the term of the lease rather than a lump sum at expiry.
Also, IF you have exceeded your km’s at lease expiry, instead of returning the vehicle to the lease company, we can find a buyer to satisfy your residual which effectively eliminates you excess km charges. In most cases, selling the vehicle at lease expiry usually reduces or eliminates the excess km charges. It also depend on how well you have cared for the vehicle.
Another remedy for excess km charges at lease expiry, is to “roll” these charges into a new lease or vehicle finance. This is NOT recommended but can be used to relieve the cost of a high over km charge.