Mileage allowance vs. excess mileage charges: which is the better option?
What is Mileage Allowance?
Mileage allowance is the maximum number of miles you're allowed to drive your leased vehicle during the length of the lease agreement without incurring any fees. This number is typically calculated based on the duration of the lease, with a predetermined maximum number of miles provided for each year of the agreement. For example, if you have a three-year lease with a mileage allowance of 10,000 miles per year, you are allowed to drive a total of 30,000 miles during the lease without any additional charges.
What are Excess Mileage Charges?
Excess mileage charges are fees that you incur for driving over the mileage allowance on your lease agreement. The charge for excess mileage can vary depending on the lease agreement, but can range anywhere from a few cents per mile to upwards of 50 cents per mile. These charges can add up quickly, especially if you significantly exceed your mileage allowance.
How to Decide Between Mileage Allowance and Excess Mileage Charges
When deciding between mileage allowance and excess mileage charges, there is no right or wrong answer. It all depends on your driving habits, estimated mileage, and budget. If you know that you only drive a few thousand miles per year, then a lower mileage allowance with the potential for excess mileage charges may be a better option for you. However, if you expect to drive a lot, then paying a little more upfront for a higher mileage allowance may be the better choice.
Consider Your Driving Habits
It's important to consider your driving habits before deciding on a mileage allowance or excess mileage charge. This can include your daily commute, travel plans, and hobbies that require driving. It's also essential to be realistic about your driving habits. If you frequently drive long distances or have a long daily commute, then a low mileage allowance may not be enough.
Calculate Your Estimated Mileage
To better understand your driving needs, it can be helpful to calculate your estimated mileage for the length of the lease. This can give you a better idea of whether a mileage allowance or excess mileage charge is a better option for you. You can use a mileage calculator, such as the one provided by the American Automobile Association, to help you estimate your total miles for the lease period.
Consider Your Budget
Ultimately, you should also consider your budget when deciding between mileage allowance and excess mileage charges. If you opt for a high mileage allowance, you may pay more upfront, but it may help you avoid potentially high excess mileage fees later on. On the other hand, if you know that you will remain under your mileage allowance, it may be more cost-effective to choose a lower mileage allowance with the potential for excess mileage charges.
Conclusion
When it comes to mileage allowance vs. excess mileage charges, there is no one-size-fits-all answer. It all depends on your driving habits, estimated mileage, and budget. By understanding the difference between these two options and considering your specific needs, you can make an informed decision on which choice is best for you. Ultimately, whether you choose a mileage allowance or excess mileage charge, leasing a vehicle can be a great way to access a new car without the upfront costs and commitment of buying.