Mileage allowance is one of the most important factors to understand when entering into a vehicle lease agreement. This guide explains what a mileage allowance is, why it matters, how to choose the correct annual mileage, and what options exist for businesses and private drivers with higher-than-average mileage demands. We also outline what happens if you exceed your allowance and how amendments can work during the contract.
Lease mileage allowance explained
A mileage allowance represents the maximum number of miles you are permitted to drive each year without incurring additional charges.
For example, if you lease a vehicle for three years with an annual limit of 10,000 miles, your total contracted mileage is 30,000 miles. At the end of the agreement, the vehicle must be returned with an odometer reading that does not exceed the combined mileage total (excluding standard delivery mileage applied to new vehicles).
Mileage allowances ensure your monthly rentals are based on realistic usage and help maintain the vehicle’s condition and value throughout your lease term.
Why do vehicle lease contracts require mileage limits?
All UK vehicle leasing agreements include mileage limits for several key reasons:
1. Protecting the vehicle’s residual value
Higher mileage accelerates wear and tear, directly reducing the vehicle’s value at the end of the lease. Mileage caps help maintain predictable depreciation levels.
2. Managing risk for the finance provider
Vehicles driven further each year are more likely to experience mechanical issues, require maintenance, or sustain general deterioration. Mileage limits help funders manage this risk effectively.
3. Ensuring accurate pricing
A vehicle’s projected end-of-contract value—based partly on expected mileage—determines your monthly rentals. Forecasting this value accurately allows leasing companies to offer competitive, fair pricing.
The best way to calculate how many miles you require
Your annual mileage is entirely your decision; funders cannot dictate the figure. However, most UK finance providers require a minimum of 5,000 miles per year.
To determine an appropriate allowance, consider the following:
Review your historical usage
Look at MOT certificates, previous leasing agreements, or telematics data to understand your typical annual mileage.
Calculate monthly usage
If past data isn’t available, estimate your average monthly miles and multiply by 12.
Account for seasonal patterns
Driving habits often vary throughout the year.
- A landscaping business may use a tipper van more frequently in spring and summer.
- Company car drivers may cycle more in warmer months.
- Families may take additional long-distance trips during holidays.
Evaluating how your driving fluctuates annually will help you choose a more accurate mileage allowance—and avoid excess charges later.
High-mileage vehicle leasing
Many customers want to know the maximum mileage they can choose for a lease agreement. While there is technically no industry-wide maximum, most funders cap annual mileage at around 50,000 miles, or approximately 180,000 miles over a standard contract.
Why the limit?
The higher the mileage, the faster the vehicle depreciates. This significantly increases the funder’s risk and reduces the vehicle’s resale value at contract end. As a result:
- High-mileage leases come with higher monthly rentals,
- Maintenance costs are typically higher,
- Options may be more limited compared to standard-mileage contracts.
However, high-mileage business leases are available. If your company’s vehicles cover substantial distances each year, our specialists can recommend funding options tailored to your operational needs.
Unlimited mileage leasing
Although searches for “unlimited mileage car leases” or “unlimited van leases” may produce online results, true unlimited mileage leasing is not offered on standard lease agreements (such as Business Contract Hire or Personal Contract Hire).
Mileage limits are essential in determining:
- Depreciation
- Residual value
- Monthly rentals
- The funder’s risk exposure
When is unlimited mileage possible?
Unlimited mileage is typically only available through purchase-based finance products, such as:
- Hire Purchase (HP)
- Conditional Sale (CS)
Under these agreements, once all payments are made, you own the vehicle. Because ownership transfers to you, the funder is not concerned about mileage affecting resale value.
If you require unlimited mileage, we can help you explore purchase finance options that may better suit your requirements.
Amending the mileage allowance
Circumstances can change, and you may find that you are likely to exceed your mileage limit. In some cases, it may be possible to amend your mileage allowance during the term, but approval is at the finance provider’s discretion.
Key considerations
- Many funders do not permit amendments within the first 12 months of the agreement.
- Some require at least six payments remaining on the contract.
- Accounts in arrears, default, or insolvency may not qualify.
- Some funders will only approve mileage increases of 10% or more of the original allowance.
- Personal Contract Hire customers and regulated clients (e.g., sole traders or small partnerships) may have limitations or be ineligible with certain funders.
- Administrative fees often apply for each amendment request.
If you think your mileage requirement will change, contact your finance provider as early as possible to explore your options.
Excess mileage charge: What happens if you go over the agreed annual mileage?
If you return your vehicle with mileage above the agreed limit, the finance provider will charge an excess mileage fee. This fee compensates for the additional depreciation caused by higher usage.
Excess mileage rates vary depending on:
- The finance provider
- The vehicle manufacturer
- The type of contract
Your excess mileage rate will always be clearly detailed in your lease agreement. To understand this further, we recommend reading our Excess Mileage Charge Explained guide.
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