Excess Mileage Charges Explained | UK Lease Guide

Go over your mileage and you pay a set rate for every extra mile - typically 3p to 30p per mile in the UK, with the exact figure printed on your agreement before you sign. It's charged once, at the end of the contract, on your total miles. Nothing is charged year by year.

What do you pay if you go over your mileage?

You pay a fixed pence-per-mile rate for every mile above the total mileage in your agreement. Multiply the extra miles by that rate and that's the bill. On a car with an 8p per mile rate, 4,000 extra miles costs £320. There's no penalty on top and no scaling - it's straight arithmetic.

The rate lives on your order documentation and in the finance agreement itself, usually on the same schedule as the monthly rental and the contracted mileage. It is set before you sign. That matters, because it's the one end-of-lease cost you can calculate to the penny in advance - unlike damage, which is a judgement call made by an inspector.

Worth being blunt about one thing: an excess mileage charge isn't a fine. Your rental was priced against a forecast of what the car would be worth at handback, and miles pull that value down. You're paying for use you didn't originally pay for. That framing helps when you're deciding whether to worry about it - a few hundred pounds spread over three years of extra driving is often a reasonable trade.

How is an excess mileage charge calculated?

Take your annual allowance, multiply it by the contract length to get your total contract mileage, then subtract that from the odometer reading at collection. Multiply the difference by your contracted pence-per-mile rate. Nothing is assessed annually - only the final total counts.

A worked example

Illustrative figures, using round numbers - they don't reflect any specific funder's rates:

So can I do 20,000 miles in year one?

On most contract hire agreements, yes. Contract hire - the long-term rental product behind almost all UK car leasing, also called Personal Contract Hire (PCH) for individuals and Business Contract Hire (BCH) for companies - pools your mileage across the whole term. A quiet second year offsets a heavy first year. The funder only reads the odometer once, when the vehicle goes back.

One caveat that catches people out: if the agreement ends early - voluntary termination, a total loss, or an early replacement - the funder recalculates your allowance pro-rata to the months actually elapsed. Front-load your miles and end early, and the excess bill can be larger than you expected. If you want the full picture of how allowances are priced in the first place, our guide to how lease mileage works and what it costs covers the pricing side in detail.

What are typical excess mileage rates in the UK?

Across the UK market, excess mileage rates typically range from about 3p to 30p per mile. Most mainstream cars sit somewhere between 3p and 15p. Premium, luxury and performance models can reach 20p to 30p or more, because every extra mile does more damage to a high-value car's resale figure.

Two vehicles at the same monthly rental can carry very different ppm rates, because the rate tracks the car's value and its residual profile rather than your payment. In our experience the difference between funders on the same vehicle can be as wide as the difference between vehicles - which is exactly why the rate deserves a look before you sign, alongside the other fees to expect when leasing.

Is VAT added, and when do you actually pay?

On a personal lease the excess mileage rate quoted to you includes VAT, so the figure on your agreement is the figure you pay. On Business Contract Hire the rate is quoted excluding VAT, and VAT is added at the standard rate - 20% under the rates published on GOV.UK. Payment falls due after collection, on a final invoice.

The sequence is straightforward. The vehicle is collected, the inspector records the odometer reading and completes a condition report, and the funder then issues an invoice covering excess mileage and any damage beyond fair wear and tear. Terms vary by funder, but 14 to 30 days from invoice is common. Do keep a dated photo of the odometer on collection day - it's free insurance against a transcription error.

VAT-registered businesses can normally recover VAT on the charge on the same basis as the rentals themselves, and the cost is generally treated as part of the hire cost for tax purposes. Restrictions apply and your accountant should confirm your position. Businesses running electric vehicles should also look at whether salary sacrifice suits them better than straight BCH - the mileage mechanics are the same, but the tax treatment is not.

What happens if you drive fewer miles than your allowance?

Nothing, in cash terms. UK lease agreements very rarely refund unused miles - the allowance is a ceiling, not a two-way adjustment. Come in 6,000 miles under a 30,000-mile contract and you simply hand the car back with no mileage charge. You don't get money back.

Which is why over-buying mileage "to be safe" isn't free either. Every extra 1,000 miles a year you add pushes the monthly rental up for the whole term, and if you don't use them, that money is gone. There's a genuine balance to strike, and it's a conversation worth having when you're setting the contract up rather than a box to tick. Our breakdown of what's included in your monthly payment shows how mileage feeds into the rental.

Is it cheaper to buy extra miles upfront or pay the excess?

Compare two numbers: the extra monthly cost of a higher allowance across the full term, against your excess miles multiplied by the ppm rate. Buying upfront usually wins on premium cars with high ppm rates. On a cheap car with a low rate, paying the excess at the end can genuinely be the better deal.

Illustrative example, using round numbers. Say you're on 36 months and think you'll do 12,000 miles a year rather than 10,000 - that's 6,000 extra miles over the term:

The rule of thumb our team uses: work out the break-even ppm by dividing the total uplift by the extra miles. In the first row, £360 ÷ 6,000 miles = 6p. If your contracted rate is above the break-even figure, buy the miles upfront. If it's below, and you're confident in your estimate, the excess is cheaper. Run it on the actual numbers on your quote - it takes thirty seconds.

One honest caveat. The upfront route buys certainty as well as miles, and certainty has a value if your driving is unpredictable. If you're within a few pounds either way, take the higher allowance and stop thinking about it.

How do you avoid an excess mileage charge?

Estimate honestly at the start, track your pace every few months, and speak to your funder early if you're drifting over. Most funders will consider a mid-contract mileage revision, and that almost always costs less than the excess - but only if you ask before the miles are already on the clock.

Set the allowance properly at the outset

Track your pace mid-contract

Divide your total contract mileage by the number of months on the agreement to get your monthly budget. A 36-month, 30,000-mile contract gives you roughly 833 miles a month. Check the odometer against that figure two or three times a year - at MOT time, at service time, whenever. If you're 15% ahead at the halfway point, you have time to act; at month 33 you don't.

Your options if you're running over

• Revise the allowance mid-term. Many funders permit it, usually with restrictions - commonly not in the first few months or the final few months of the agreement. Ask us and we'll check the specific funder's policy.
• Do nothing and pay it. Perfectly reasonable if the rate is low and the overage is modest. £200 at the end is not a crisis.
• Reduce the miles. Obvious, but a second household car, the train for a regular long trip, or car-sharing a commute for six months can close a gap of a few thousand miles.
• Plan the next contract better. If you've gone over on this one, take the higher allowance next time. Our team would rather set the mileage right than sell you a lower monthly you'll regret.

Can you challenge an excess mileage invoice?

You can challenge the arithmetic, but not the rate. The pence-per-mile figure was agreed when you signed and isn't negotiable at handback. What you can and should check is the odometer reading recorded at collection, the delivery mileage at the start, and whether the total allowance has been calculated correctly for the term.

Three things to verify on any excess mileage invoice:

1. The collection odometer reading matches your own photo from handback day.
2. The total allowance equals your annual figure multiplied by the full contract term (or correctly pro-rated if the agreement ended early).
3. The rate applied matches the rate on your agreement, and the VAT treatment is right for your contract type.

Excess mileage is separate from damage. Condition is assessed against the fair wear and tear standards published by the British Vehicle Rental and Leasing Association (BVRLA), the UK trade body for the leasing sector. Under BVRLA fair wear and tear standards, deterioration from normal use is expected and shouldn't be charged - damage from impact, neglect or poor repair is a different matter. If a dispute over an end-of-contract invoice can't be resolved with the funder directly, BVRLA members are covered by the association's conciliation service, and regulated consumer agreements also fall within the remit of the Financial Ombudsman Service after the provider's own complaints process has run its course. FVL is authorised and regulated by the Financial Conduct Authority (FCA) and a BVRLA member, and our complaints procedure sets out how we handle concerns.

Frequently Asked Questions

What should you do next?

Three practical steps. Work out your genuine annual mileage using MOT history rather than memory, ask for the excess mileage rate on every quote you're comparing, and run the break-even calculation before you settle on an allowance. Then price it properly with someone who'll show you the trade-off.

If you're weighing leasing against buying outright, our worked example on the true cost of leasing versus owning puts mileage charges in the context of the whole cost of running a car. And if you're at the other end of the contract already, what happens at the end of your lease walks through collection, inspection and the final invoice.

Written by the leasing team at First Vehicle Leasing, arranging personal and business vehicle leases across the UK for over 25 years. Authorised and regulated by the Financial Conduct Authority and a member of the BVRLA. This guide is reviewed and updated as market rates and regulations change.