When you decide to finance a car, one of the key aspects you’ll need to consider is the mileage limit. If you’re unfamiliar with the term “excess mileage,” it refers to the number of miles driven beyond the agreed-upon limit in your car finance contract.
Understanding excess mileage
Excess mileage comes into play in a type of car finance agreement called Personal Contract Hire (PCH) or Personal Contract Purchase (PCP). In these agreements, you agree to drive a car for a set period (usually between two to four years) and agree to an annual mileage limit.
The car’s value will be calculated based on how many miles you intend to drive, as the car will likely depreciate more if it’s driven extensively.
If you exceed the agreed mileage, you may be subject to additional costs when your contract ends. These costs can vary depending on the finance provider and how far you’ve exceeded the mileage limit.
Typically, these charges are calculated on a per-mile basis and can quickly add up, so it’s important to be mindful of your usage.
How excess mileage charges are calculated
To avoid surprises, it’s vital to understand how the charges work. Finance providers usually calculate the excess mileage charge based on a set rate per mile. This rate can range from around 5p to 30p per mile, depending on the provider and your specific contract.
💡 For example, if you agree to a 10,000-mile limit per year but exceed it by 1,000 miles, and the excess mileage rate is 15p per mile, you could end up paying £150 for those extra miles.
Excess mileage charges can be a significant financial burden, especially if you’ve driven far beyond the limit. It’s therefore a good idea to review your contract carefully and assess your expected driving habits before signing up for a car finance deal.
Managing your mileage to avoid extra charges
If you’re concerned about exceeding your mileage limit, there are steps you can take to avoid additional fees. First, consider whether the mileage limit in your contract reflects your actual driving needs.
If you’re someone who commutes long distances or takes frequent road trips, opting for a higher mileage limit at the outset could save you money in the long run.
Another option is to carefully monitor your annual mileage and adjust your lifestyle accordingly. If you’re approaching your limit, try to reduce non-essential driving or consider alternatives like carpooling or public transport.
Additionally, if you feel you’re likely to exceed the agreed mileage, you may be able to renegotiate the terms of your contract before it’s too late, adjusting your limit to suit your needs.
Final notes
Excess mileage is one of the most common pitfalls of car finance agreements. The cost of additional miles may feel manageable at first, but over time, it can quickly add up. Being mindful of the mileage terms from the start and adjusting them if necessary is essential to avoiding unnecessary fees.
Always make sure to check your car finance contract thoroughly to understand what charges you might face if you exceed your mileage limit.
