Mileage Allowance
Also known as: Annual Mileage Limit, Contracted Mileage, Lease Mileage Cap
The mileage allowance is the maximum number of miles you can drive per year under a lease agreement, typically 10,000, 12,000, or 15,000 miles. Exceeding this limit results in per-mile excess mileage charges at lease end.
How Mileage Allowance Works
When structuring a lease, you choose an annual mileage allowance. Common options are 10,000, 12,000, and 15,000 miles per year. Higher allowances mean higher monthly payments because the car depreciates more with additional mileage (lower residual value). The cost difference between tiers is usually $15-$30 per month. It is much cheaper to buy extra miles upfront than to pay excess mileage charges at lease end. For example, upgrading from 10,000 to 12,000 miles at signing might cost $20/month, but excess miles at return cost $0.25 each — meaning 2,000 extra miles at return costs $500/year.
Example
10,000 miles/year: $419/month (residual 60%). 12,000 miles/year: $439/month (residual 57%). 15,000 miles/year: $469/month (residual 53%). Paying $20 more per month upfront for 12K is better than paying $0.25/mile overage on 10K.
Frequently Asked Questions
What mileage allowance should I choose for my lease?
Choose based on your actual driving habits. Track your mileage for a month and multiply by 12. Most Americans drive 12,000-15,000 miles per year. It is always cheaper to buy a higher allowance upfront than to pay excess mileage charges at lease end. When in doubt, choose the higher tier.
Can I negotiate a custom mileage allowance?
Yes. While standard options are 10,000, 12,000, and 15,000 miles per year, most leasing companies can customize the allowance in 1,000-mile increments. Some even offer 7,500-mile leases for very low-mileage drivers. Ask for pricing on different tiers to find the best value.
What happens if I go over my mileage allowance?
You pay an excess mileage charge for every mile over the total allowance at lease end. Rates are typically $0.15-$0.30 per mile depending on the manufacturer. On a 36-month/12,000-mile lease (36,000 total), driving 40,000 miles means 4,000 excess miles at $0.25/mile = $1,000.
Related Lease Terms
An excess mileage charge is a per-mile fee ($0.
Residual ValueResidual value is the projected worth of a leased vehicle at the end of the lease term, expressed as a percentage of MSRP.
Capitalized CostThe capitalized cost is the total amount being financed in a lease — the lease equivalent of a purchase price.
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