Understanding Lease Terms

What are common car lease terms?

Common car lease terms refer to the length and conditions of a leasing agreement. Lease terms typically range from two to four years, during which you make fixed monthly payments. The contract will also outline the mileage allowance, maintenance options, and any potential fees, such as charges for excess mileage or damage. At the end of the lease, you return the car to the leasing company unless you have a lease-end purchase option.

What does mileage allowance mean?

Mileage allowance is the pre-agreed number of miles you’re allowed to drive during the lease term without incurring extra charges. This limit is typically set between 5,000 and 30,000 miles per year, depending on your needs. It’s important to choose a realistic mileage allowance based on your expected usage, as exceeding this limit can lead to additional costs at the end of the lease.

What are excess mileage charges?

Excess mileage charges are fees you’ll incur if you exceed the agreed mileage allowance in your lease contract. These charges are usually calculated on a per-mile basis and can vary depending on the leasing company. To avoid unexpected costs, it's advisable to carefully estimate your annual mileage before signing the lease.

What is a lease-end purchase option?

A lease-end purchase option gives you the opportunity to buy the car at the end of your leasing term, usually for a predetermined price. This option is more common in Personal Contract Purchase (PCP) agreements but can also be offered in some leases. If you choose not to buy the car, you simply return it to the leasing company.

How do early termination fees work?

Early termination fees apply if you decide to end your lease agreement before the agreed term is up. These fees can vary but usually involve paying a percentage of the remaining lease payments. It's important to review the early termination terms in your contract, as ending a lease early can be costly.