Why do leases have mileage limitations and purchases do not?
Leases include a mileage limit because the residual value is based on the expected mileage. Driving more miles often reduces the value of the vehicle. Generally, excess mileage charges are the way lessors recover the expected decrease in value from the additional use. When you purchase a vehicle, if you drive more miles than you expect, you will not owe an excess mileage charge, but the vehicle will probably be worth less when you trade or sell it.
A. Vehicle leases include a mileage limit because the residual value is based on the expected mileage. You have a right to return the vehicle at lease end without responsibility for the actual vehicle value. This is one of the principal advantages of leasing. There is no similar guarantee when purchasing a vehicle. Driving more miles reduces the value of the vehicle. Excess mileage charges are the way lessors recover the decrease in value from the additional use. When you purchase a vehicle, if you drive more miles than you expect, there is no excess mileage charge owed to the creditor. However, the vehicle will be worth less when you trade or sell it so the used car market imposes an “excess mileage charge” through the reduced vehicle sale price. Even if you keep the vehicle, the vehicle value has been reduced by the extra mileage. The extra mileage is reflected not only in a reduced vehicle value, but also in the likelihood of higher future maintenance costs.
Vehicle leases include a mileage limit because the residual value is based on the expected mileage. You have a right to return the vehicle at lease end without responsibility for the actual vehicle value. This is one of the principal advantages of leasing. There is no similar guarantee when purchasing a vehicle. Driving more miles reduces the value of the vehicle. Excess mileage charges are the way lessors recover the decrease in value from the additional use. When you purchase a vehicle, if you drive more miles than you expect, there is no excess mileage charge owed to the creditor. However, the vehicle will be worth less when you trade or sell it so the used car market imposes an “excess mileage charge” through the reduced vehicle sale price. Even if you keep the vehicle, the vehicle value has been reduced by the extra mileage. The extra mileage is reflected not only in a reduced vehicle value, but also in the likelihood of higher future maintenance costs.
A. Vehicle leases include a mileage limit because the residual value is based on the expected mileage. You have a right to return the vehicle at lease end without responsibility for the actual vehicle value. This is one of the principal advantages of leasing. There is no similar guarantee when purchasing a vehicle. Driving more miles reduces the value of the vehicle. Excess mileage charges are the way lessors recover the decrease in value from the additional use. When you purchase a vehicle, if you drive more miles than you expect, there is no excess mileage charge owed to the creditor. However, the vehicle will be worth less when you trade or sell it so the used car market imposes an “excess mileage charge” through the reduced vehicle sale price. Even if you keep the vehicle, the vehicle value has been reduced by the extra mileage. The extra mileage is reflected not only in a reduced vehicle value, but also in the likelihood of higher future maintenance costs. Back to the top Q5.
