By on June 11, 2015

Sunset Chevrolet Circa June 2014

Leases are red-hot these days, but those signing up for temporary ownership of their rides will be facing lower mileage caps in exchange for low payments.

According to Experian Automotive, 31 percent of all U.S. new-car sales during Q1 2015 were leases, CarsDirect writes, with monthly payments entering the sub-$150 range for small cars after paying $1,999 at signing, $199/mo. for midsize models upon cutting a check for the same amount at the dealership.

However, those deals are coming with a price: in order to keep residual values healthy, annual mileage caps are being trimmed.

The publication looked over the mileage caps of 300 leases, finding the average cap figure came to 10,900 miles per year; Edmunds adds caps have fallen below 11,000 miles/year for the first time ever in Q1 2015. One lease advertised by General Motors dropped the cap from 12,000 miles/year in 2014, to 10,000 miles this year, with the now-extra 2,000 miles amounting to $1,500 for a three-year agreement plus an overage fee of 25 cents/mile.

CarsDirect says concerns over caps aren’t a new thing, akin to data caps on smartphone plans, but adds consumers should keep the new lower caps in mind, lest they end up spending more money than originally thought.

[Photo credit: Sunset Chevrolet/Facebook]

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36 Comments on “Attractive Leases Mean Lower Mileage Caps In Exchange For Low Payments...”

  • avatar

    Maybe I assume people are too competent, but I don’t understand in what way this is even a thing. Miles on a lease are just one of the parts you negotiate. Want a 36-month, 10k miles/year lease? You can have one, and the residual will be 63% (say), so your payment is based on 37% depreciation. Want a 36/12 lease? Now the residual will be 62%, so your payment is based on 38% depreciation. This isn’t exactly a trick.

    • 0 avatar

      You are right in that everything is negotiable – even lease terms – even though most people may not realize that. I think the main point here is that the manufacturers want to advertise a lower monthly lease payment right off the bat to drum up interest.

      • 0 avatar

        I doubt many buyers understand much about the mechanics of leasing. Even before this there were many established third party leasing companies that could give you better rates on low mileage leases or a host of other specific needs or conditions. As others have said it’s likely just another tool to have teaser rates to get people in the door.

      • 0 avatar

        I helped my boyfriend get a nissan juke in 2013. Nissan had a “special” of $169 a month with $2999.99 down for 36 months at 15,000 miles a year. I beat up the dealer hella good and we walked out at $187 a month with 15,000 miles a year and nothing down, but the first months payment. He just traded it in for a Jeep Renegade with $200 trade equity.

  • avatar

    “with the now-extra 2,000 miles amounting to $1,500 for a three-year agreement plus an overage fee of 25 cents/mile.”

    This. 20K miles vs 24K miles means nothing in terms of valuation on a two year lease. But they figured out they can screw another $1,500 plus any overage out of your which all amount to pure profit.

    • 0 avatar

      Can you please tell me your definition of “screw?”

      There’s no “screw” as the terms are very clear cut and gone over ad naseam, unless the person is just a completely brain-dead, mouth breather, dragged in on a cart to sign a lease. Go over the mileage allotted, and pay the per mile figure upon lease end. Quite simple. If you wind up buying the car you don’t have to worry about miles, obviously. You also fail to mention that many manufacturers will waive mileage overages (as long as they’re not excessive) if you remain manufacturer loyal.

      Now, that said, this doesn’t apply to Credit Union leases. Run far away from those, people. They will ding you in every way imaginable for wear and tear when you turn in the lease. You may save 10-20 bucks a month vs. the manufacturer’s lease, but they more than make up for it in the end, they are a bank after all and that’s what THEY do….screw. Banks screw…that’s their whole business model.

      • 0 avatar

        Read the fine print ;)

        I speak from a wholesale perspective, and in wholesale mileage is irrelevant as the valuation is determined by a number of factors starting with overall condition as it runs through the block (then factors such as model year, warranty status, supply/demand, financing popularity etc). Wholesale matters as it forms the basis of used car valuations for KBB, Black Book, MMR etc which also influence your future trade value and even loan terms. Just look at the MY13 Malibu data I have displayed below. The cars at 21-22K trade between $14,5-$15,4, but then on the same week the same model trades between $14,0-$14,9 with nearly double the mileage. This is a $500 difference between the low and high of the sample set yet the mileage is nearly double. Excluding extreme outliers, mileage does not matter when the cars come right off lease. Period. The overage scam lease companies run is a simply a profit center. If you drive 2K extra miles at 25 cents/mile, this adds up to a $500 fee but as I show you, it does not cost the leasing company any less. In fact you could ride another 15K miles and on average and it *might* cost them $500 in “lost” resale while the lessee coughs up $3750 in penalties. Cameron noted in order to get your extra 2K miles per year GM cut from its lease agreement you cough up $1,500 to get something that was just offered last year and costs GM nothing. Now do you understand how you’re getting screwed?

        MY13 Chevrolet Malibu LT


        05/26/15 PA $14,500 21,392 Avg WHITE 4G P Yes
        06/02/15 ARENA IL $15,000 21,762 Avg GRAY 4G A Yes
        05/28/15 ARENA IL $15,500 21,806 Avg WHITE 4G A Yes
        06/02/15 ARENA IL $15,000 22,231 Avg TAN 4G A Yes
        05/26/15 PA $15,200 22,453 Avg SILVER 4G P Yes
        05/22/15 PA Regular $14,200 22,488 Avg GREY 4G Yes
        05/28/15 ARENA IL $15,400 22,929 Avg TAN 4G A Yes


        06/03/15 NEWORLNS Regular $14,900 37,964 Avg BEIGE 4G A Yes
        05/26/15 ORLANDO Lease $14,000 38,008 Avg BLACK 4G A Yes
        06/01/15 OHIO Lease $14,800 38,150 Avg SILVER 4G A Yes
        05/26/15 RIVRSIDE Lease $13,800 38,237 Avg GREY 4G A Yes
        05/26/15 ORLANDO Lease $14,000 38,244 Avg CHARCOAL 4G A Yes
        06/10/15 NASHVILL Lease $14,200 38,557 Avg SB SILVR 4G A Yes
        06/03/15 NEWORLNS Regular $14,000 38,878 Avg BLUE 4G A Yes
        05/27/15 NEWORLNS Regular $14,600 39,436 Avg SILVER 4G A Yes

        • 0 avatar

          Seems to me that those markets are pretty far apart geographically (other than the Ohio in the high miles group being close to IL relatively speaking) and that can account for some serious price differential. Back in the day I knew a guy who just did wholesaling and his whole gig was taking a VW to CA from the Seattle area, running it through an auction down there and picking up a Subaru to bring back. He said he averaged about $1000 per car. So he grossed about $2000 per trip just driving back and forth to CA. Of course this was back when gas was cheap.

          • 0 avatar

            That’s a good point about local markets and price differentials. I have paper copies of the BAA auction reports from 2004-6 at home and I used to make notations in them to further prove this mileage point to others I encountered.

            When gas was cheaper I used to see buyers from the overall OH-WV-PA area trade at BAA, Mercer AA, or Tri-state in Wash County. Years back I remember meeting buyers from NJ and NYC who had driven all the way to BAA in Western PA just to do a larger buy because we we’re so much cheaper than the NJ/NYC area (and apparently the product was in better condition than what floats around NJ/NYC auctions). Most of the stuff we bought from the NYC (and NY in general) was trashed but a talented bodyman and /or detailer can fix alot of imperfections withing reasonable costs.

      • 0 avatar
        formula m

        Well they are screwing people for charging $1500 for the 2000mi difference. That’s $0.75 for each of the excess miles. That’s way more expensive than it should be. When I worked for GM Canada during the (glory)days of 07-08 it was $0.15 per kilometre for excess which is around $0.25 in terms of per/mile. Many customers need the lowest payment because that’s probably more than they can afford. For the people that need to have a low cost payment to pay $0.75/mi instead of $0.25/mi like standard rate is predatory. Best option then will be to roll the last few payments(negative equity) into their next lease rather than pay that much to drive the current vehicle that has xxx amount of mileage at the premium cost of $0.75 per mile. So many people will get screwed.

        • 0 avatar

          formula n:

          I read it to be $1,500 for 2,000 miles per year, or 6,000 in total, getting to 25 cents a mile.

          Funny how that hasn’t changed in nearly 10 years

        • 0 avatar

          @formula m

          Precisely. In general mileage overruns are profit centers for the leasing company but what GM is doing is a whole new low. However it occurred to me just now this may be a tactic to help GM and its dealers put people in new leases after termination. Oh so you’re X over, we’ll roll it over into your new lease but GM is offering Y incentive on this model so you’ll save Z which offsets your rollover if you lease today etc.

  • avatar

    I was talking to a guy who is a commercial real estate broker and he said office rents were flat because so many folks were working from home. That was his theory anyway. I wonder if that is part of it as well. If you’re working from home full time or multiple days a week a low mileage lease could make a lot of sense.

    • 0 avatar

      This is certainly true for me. When I was commuting I was putting about 25k a year on a car. Now that I work from home, it’s down to 8k a year. A 10,000 mile lease would be fine for me.

    • 0 avatar

      Or you live in the Northeast and don’t do roadtrips. In my parents entire adult lives, there is only one time they’ve ever put more than 10,000 miles on a car in a year and that was when they were regularly making weekend trips to Vermont 4.5 hours away.

    • 0 avatar

      When my wife was working from home the car she drove and we frequently used for family outings did 8-10,000 per year.

    • 0 avatar

      I work from home or am flying somewhere the majority of the time, I have no commute. I might have been interested in a really low mileage lease if one had been offered this time around. I drove my 328i 5K last year. But the lowest BMW will go is 10K, and in my state the sales tax on leases is not attractive, so I bought the new one. But as 28-cars pointed out, mileage does not make THAT much difference so you would not save much.

      In total, I put about 15K a year on, but across four cars for one drive it doesn’t add up to much on any one car.

  • avatar
    Jeff S

    Even more sense is not to lease a new car and keep what you have since you are working at home and not driving as much. Save your money.

  • avatar

    10k miles/yr leases have been commonplace for years. Short of an exotic, I can’t think of single car you can’t easily have your choice of 10/12/15k. Mercedes even offers a 7,500 mi/yr option.

  • avatar

    Teaser lease deals seem to be the majority of local dealer tv and print adverts these days.

    I’m waiting for (but still haven’t seen) one for $0 per month with the $3000 down payment in the unreadable fine print.

  • avatar

    10K would work for me. And my mom. And my wife. We at best average 12K on one car.

    But remember, anxious off-lease buyers, it takes about $150 and 5 minutes to set the electronic odometer to any desired number.

    • 0 avatar
      87 Morgan

      Are you referencing odo tampering?

      Serious felony.

      • 0 avatar

        Yup, and your mileage is logged during those “free” oil changes. Hard to claim the car has 35k when you brought it in for the 60k service.

        Back in the day, I knew folks who took off the speedo cable and told speed by tach….

        I think the real scam in the next few months will be … wait for it….flood of water damaged cars, washed through a few states with easy title laws.

    • 0 avatar

      I don’t understand why someone who is smart enough to be able to tamper with the odometer on a modern car needs the $150. Everytime we run across a Mercedes with tampered odometer, it makes me wonder. The people that create these CAN blockers and other devices have some serious computer skills. Why waste it on this? As soon as the guy with the tampered lease gets caught, he will make a plea deal to give up the guy who did the tampering. It makes no sense to me.

      • 0 avatar

        I would do it to my own for S&G if I understood the system but ultimately its diminishing returns. There is a visible world of difference between a car physically with 30K vs one with 60K that will get you red flagged. Otherwise you TMU your car for a couple of thousand miles on an odo? Doesn’t seem worth the effort unless you’re just into hacking things.

    • 0 avatar

      Wouldn’t insurance fraud be 100x easier? Just “forget” where you parked it. Mexico.

  • avatar

    “Leases are cheaper when there’s a lower mileage cap!” And in other news, “The sun rises in the east!” Thanks, TTAC.

    • 0 avatar

      Exactly! Except my ex gf would claim she’d rack up 36,000 miles on her Civic lease, 24 month in on a 36/36, turn it in early at that point and the dealer would forgive all, since she was signing on for another new Civic 36/36 lease.

      **She’s a pathological liar.

  • avatar

    I can’t seem to even keep my teenagers under the 12k per annum limit…no more leases when these are over…gonna go back to buying old European cars and driving them until they simply rust to bits. I have bought two old Volvos this year, spent minimal money to buy them, spending money as needed to keep them in good working order, and we can drive all we want.

    • 0 avatar

      What did you buy?

      • 0 avatar

        97 V90 wagon, 2000 C70 convertible as a summer beater/toy. Cheaper to insure because I don’t carry full coverage on them, easy to work on, parts are available at U Pull & Pay for cheap. There’s also something to be said for not obsessing about every little nick and scratch like I have to with the leased cars. And several neighbors are fascinated with the headlamp washers and wipers…

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