Car Lease Mileage
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Leasing a car is an attractive option for many buyers because of the low monthly payments. But because mileage restrictions can lead to lease penalties, there are plenty of consumers unwilling to take the risk.
Fortunately, most new car companies offer a variety of car lease mileage options beyond the standard mileage contracts that will suit your individual needs. The most common types of car lease mileage options include:
- Low-mileage leases.
- Standard-mileage leases.
- Extra-mileage leases.
- Unlimited-mileage leases.
How Mileage Affects Your Monthly Payments
Before you decide which mileage option is best for you, it's important to understand how mileage will affect your monthly payments.
Most car manufacturers and dealerships place restrictions on allowed mileage for leased vehicles to avoid excessive wear and tear. This helps to ensure that the pre-determined residual value of the vehicle at the end of the lease is maintained.
Residual value is:
- The expected worth of the vehicle at the end of a lease.
- Sometimes non-negotiable.
- Written into the lease contract.
- Sometimes referred to as the “buyout price."
If excessive mileage causes the agreed-upon residual value to dip below market value—the price a vehicle can be sold for on the current market—the dealer will lose money.
To make sure that the value of the car is maintained, dealerships and other finance companies will adjust your monthly payments to match the mileage option you choose.
In general, higher mileage lease options will result in higher monthly payments.
Car Mileage Leasing Options
Though a higher mileage lease contract will usually result in higher monthly payments, it could end up being cheaper than the cost of a lease penalty for going over the allowed number of miles.
A low-mileage lease is just as it sounds—your allowable miles are lower than those in most standard leases, but often for a much lower price than standard leases, as well. For example, your dealership may offer you a low-mileage lease of 10,000 miles per year, but your monthly payment would be also comparably low.
Because of the low monthly mileage allowance, this mileage option might be a good choice if you:
- Want to keep your monthly payments low.
- Don't have a long commute to work or school.
- Don't plan to use the car for long trips.
- Plan to use the car as a second vehicle.
Keep in mind, however, that the average motorist drives 13,500 miles annually or more. So it's incredibly important to thoroughly assess your own driving habits before considering a low-mileage lease. If your commute isn't amenable to such a low limit on miles, you could be on the hook for major overage fees at the end of your lease term.
Somewhere in between a low-mileage lease and an extra-mileage lease, the standard-mileage lease is the most common option for buyers.
An example of a common standard mileage lease is around 36,000 miles for a common lease term of 36 months.
Typically, standard leases are a good option if you:
- Don't need an extensively low monthly payment.
- Have a moderate daily commute.
- Don't plan to use the vehicle for any long trips.
For drivers who plan to exceed the typical standard-mileage lease, the extra-mileage lease could be a reasonable choice.
Extra-mileage leases can vary, with some ranging all the way up to 100,000 miles for a lease of 3 years.
Some of the disadvantages to an extra-mileage lease include:
- Significantly higher monthly payments.
- oThe amount your payments increase will depend on how many extra miles beyond the standard mileage contract you need.
- The manufacturer's warranty may expire if you exceed the warranty mileage limit.
- oThis may result in additional costs if an extended service contract is required.
- Excessive mileage can sometimes lead to other wear and tear lease penalties.
Some of the advantages to an extra-mileage lease include:
- Avoiding mileage overage penalties.
- Being less stressed over mileage limits.
- Potential refunds for unused mileage at the end of the lease.
The last option among consumers is the unlimited-mileage lease, which is sometimes referred to as an open-end lease.
With this option, you will have:
- No mileage restrictions.
- Higher monthly payments.
- Requirements to pay for the depreciation of the vehicle if it is lower than market value upon return.
- EXAMPLE: A $20,000 car is estimated to have a market value of $11,000 at the end of the lease. If, upon return, the car is only estimated to be worth $9,000 due to mileage or other wear and tear, you'll pay the $2,000 difference.
While this option can be risky because the end price isn't pre-determined, it could be a good option if:
- You plan to put a high number of miles on the car.
- You take long trips frequently.
- You don't want to put excessive miles on another vehicle you own.
- You simply don't want the worry of exceeding mileage restrictions.