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A Mileage Charge results when a car is driven over the allowed miles used to calculate the residual value of the car. The monthly payment on a lease is determined by the value of the car, its residual value at the end of the lease and interest rates. This is also referred to as the car's capitalized cost. When a car is driven miles in excess of the mileage estimate used for the residual value calculation, then the car is very likely to be worth less at the end of the lease term.
The mileage charge compensates the leasing company for the excess wear and tear on the car beyond the estimate used in the calculation of residual value. Typically, a lease allows the driver 12,000 miles each year. The number of excess miles is determined by subtracting the total allowed mileage over the term of the lease from the actual mileage on the car's odometer.
Mileage charges will vary with the value of the car leased. Cars with a higher retail price will have higher excess mileage charges.
Other forms of this term include - mileage cap |
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