Excess mileage is charged by a car leasing company (or van) to compensate the leasing company for over-performance of the contractual mileage. You may for example, take out a contract on 10,000 miles per annum, on a three year term. The leasing company will therefore calculate their residual value (resale value of the vehicle) on a three year old vehicle, with 30,000 miles on the clock and this drives the monthly contract hire rental you will be charged. This also applies to the amount of money the leasing company budgets for maintenance, servicing and repair, if you have opted for a “maintained contract” as well.
If you travel more miles in three years and the car returns with say 35,000 miles on the clock, you will be charged an excess mileage rate on the pence per mile figure quoted at the outset. So if the excess mileage pence per mile rate was 5 pence per mile this would equate to 5,000 excess miles (35,000 – 30,000) x 0.05 p = £250
However what happens if you do less than 30,000 miles over the three year contract? Unless you contact the leasing company and amend your annual contractual mileage, you will not benefit from a reduced monthly rental or the “credit miles” if the car goes back under-mileage.
Therefore if you think you may go over, or under, the contractual mileage the best course of action is to amend your contract which can be done quite easily. Just ask your leasing company supplier for a quote to amend the contract and let them know what your new annual mileage is likely to be (over the full term).
On the example above, the annual mileage would be 11,667 miles per annum (35,000 divided by 3).
If you run a larger fleet of vehicles however, many companies may rely on “excess mileage pooling“ to manage over and under mileage performance of their leased vehicles. However each leasing company will offer a different excess mileage pooling period i.e. quarterly, six-monthly, annually or even not at all.
Vehicles that return to the leasing company in these ”stand alone” pooling (billing) periods are usually aggregated to offset any credits against any debits, so that you can benefit from the under mileage performing cars. There may be restrictions on this facility, depending on your fleet size, so it is always best to check with each company. If you also lease with several leasing companies, excess mileage pooling will not apply across the different companies.
Don’t rely on excess mileage pooling if you have a small fleet of vehicles, as you may find that cars return in different billing periods and you may potentially lose the benefits of any credits.
