When leasing a vehicle, your estimated annual mileage is used to calculate your monthly rentals and is also the basis used to help forecast residual value of the vehicle at the end of its contract.
If you exceed your stated mileage you may face excess mileage charges on a Contract Hire agreement, so in some cases, people think it is best to overestimate your mileage.
It is more important to give careful consideration to the miles you are likely to cover over the period of the contract, taking in to account any change in circumstance which may occur, traveling to visit siblings at university for example.
Before signing an agreement, aleways ask for the cost if exceeding the stipulated mileage, this will be provided as a cost per mile in pence (ppm).
Let’s say a vehicle based on 10k miles per annum will have a monthly rate of £200 per month and at 12k miles per year £210. You have agreed to a contract based on 10k miles per year over 3 years, therefore the forecast value of the vehicle at the end of the contract is based on a mileage not exceding 30k.
However, you actually covered 33k miles at an additional cost of 7ppm and therefore have an extra charge of (3,000 miles x £0.07) £210.00.
If you had have agreed to the 12k miles contract at an additional £10 per month, then you would have paid and additional £360 over the duration of the contract and £150 above a contract based on your actual miles covered.
If your mileage changes most contracts will allow you to align an existing agreement with a relevant cost adjustment.
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