Part of managing a business fleet is sourcing the vehicles and one of the increasingly popular methods of funding is leasing.
There are some considerations that you will need to bear in mind when providing your drivers with a lease vehicle one of which is their mileage.
As part of a business hire contract you will agree to a number of conditions, one of which is an annual mileage allowance on the vehicle.
Depending on your company policy this may be automatically set at a specific mileage for all drivers or you may need to negotiate with your drivers on what their mileage allowance will be.
When deciding on an appropriate mileage for drivers you’ll want to take into account their current mileage use, whether there are any expected changes such as a new project that requires more travel for meetings, and if they can reduce mileage in any way.
As well as the contractual mileage you will also agree to an overmile charge, which is applied if the driver exceeds the contractual mileage.
All lease funders will have a minimum and maximum allowance for vehicles but the limits will vary depending on the funder, whether it is petrol, diesel or electric-powered and if it is a car or van.
If you are concerned about a particular vehicle being close to the higher limits of the lease mileage allowance then we can look into this and if you have not yet sourced the vehicle then we can look at alternative options to avoid the financial penalties for going over this.
If you don’t think a particular vehicle will meet the minimum mileage allowance, then you can still take out a lease but you will not benefit from being below the mileage at the end of the lease.
If there is a change in circumstances that will affect the miles a vehicle does, for example if an employee moves department, a car transfers from one employee to another, or a pool vehicle is used more frequently than expected.
Should this happen you will be able to amend the contractual mileage, though this could impact the monthly payments that you make.
Most funders will not look at amending the mileage during the first year of the contract, this is to avoid having to make multiple amendments and so that they can get an accurate estimate of annual mileage.
They also will not usually allow you to make changes in the last six months of the agreement. This is for a number of reasons but also works to your benefit as it prevents there from being a sudden and unmanageable jump in payments as there are only a few remaining left.
If you do need to amend a particular vehicle’s lease mileage then we can arrange this for you. Please note no changes will be made until you have received, signed and returned a quote for the change to the mileage and your monthly payment amounts.
The overmiles charge is the amount that you will pay if a driver goes over the contracted mileage on a particular vehicle. It is also known as an excess mileage charge.
It will be charged at pence per mile, which is the cost that you agree to when signing the finance documents, and this will be applied to all miles after the contracted allowance up to the number on the clock on collection.
If you are supplied with a maintenance package as part of the lease agreement, or separately by your fleet management company, then there will be an additional overmiles charge for this agreement as well. This means you will end up paying two charges if a driver goes over the miles.
What Happens if a Driver Exceeds the Contracted Lease Mileage?
If a driver goes over their total contracted mileage then you will be charged an overmiles charge. As we mentioned above this will usually be calculated in pence per mile and you will receive an invoice for the total over their mileage allowance at the point of collection. If you still have a direct debit set up then they may collect the payment for excess mileage via these details.
Is There an Excess Mileage Charge?
Yes, every lease contract will have an excess / overmiles charge.
How Are Excess Mileage Charges Calculated?
When a lease agreement is signed your business will agree to a contracted mileage allowance and if the vehicle is returned with more miles on the clock than this you will receive an excess mileage charge.
These charges are calculated at a cost of pence per mile, which will usually be between 3p and 60p, and be charged at the end of the agreement after collection.
The pence per miles charge is based on a number of different factors including the vehicle's value, the mileage allowance and much more.
Can You Lease a Car With Unlimited Mileage?
No. All lease agreements will have a contracted mileage allowance and you will agree to this when the finance contracts are signed.
You should be aware that there is a maximum allowance that any lease company will allow on a vehicle based on its fuel type and whether it's a car or van. If you exceed this then there may be additional penalties.
Can Extra Mileage Be Added To a Lease Contract?
If you have a lease and discover halfway through the contract that the mileage allowance is not sufficient then you will be able to amend the mileage. However, changing the contracted mileage will usually affect the monthly rental cost and if you're adding more miles this will likely cost you.
Please note that most funders will not let you make any amendments in the first 12 months or last six months of the contract.
How Can We Avoid Excess Mileage Charges?
There are a few strategies that you can use to reduce the risk of your drivers exceeding the mileage charges which include:
