During a vehicle lease transaction, the lessee sits down with a salesperson and determines the appropriate terms of the lease. One important detail that the consumer may forget to consider is the distance allowance of the lease. But exceeding the mileage specified in the lease agreement can be costly.
Manufacturers and leasing companies assess penalty fees for exceeding the mileage terms of a lease. They don't seem like much, but at 15 to 30 cents per mile, the charges add up very quickly. For example, if you drive an extra 2,000 miles on your leased vehicle above their allowance, that will add an extra $300 to $600 to your cost when the lease ends.
Suppose you move farther from work, but you did not factor in the extra miles you will need to drive when you signed the lease contract. Going 10,000 miles over the limit, fore example, would add an extra charge of $1,500 to $3,000 when you turn in the leased vehicle.
If you are aware of a potential change in your life circumstances or are unsure if the allotted lease mileage will be enough, lease companies allow you to buy extra mileage when you lease the vehicle. The cost that leasing companies charge for extra miles varies greatly, as the mileage allotment factors into the residual value of the lease. Typically mileage charges are a little less when you buy them up front.
There may be times when buying out the lease is the most cost-effective way of dealing with the mileage overage. By calculating the equity in your vehicle, you can find out if buying out your lease is a realistic option. You'll need to calculate the difference between the lease-end buyout and the actual market value of the car. If you have positive equity, or have negative equity that is equal to or less than the over-mileage charges, it may be in your best interest to buy out your lease.
