TL;DR: If you exceed your PCP mileage limit, you may face an excess mileage charge if you return the car to the finance company. The amount varies between finance providers and agreements. For example, Santander Consumer Finance currently gives an example of 14.90p per excess mile before VAT. Buying the car at the end of the agreement generally means the excess mileage charge for returning the vehicle does not apply. If you part-exchange the car, its higher mileage may affect its market value instead.
For many UK drivers, a Personal Contract Purchase (PCP) agreement can be an affordable way to finance a car. But when you take out a PCP, you'll normally agree an annual or total mileage allowance.
If your driving habits change and you go over that agreed mileage, you may wonder what happens next.
The good news is that exceeding your PCP mileage limit doesn't automatically mean you have to pay a large bill. What you owe depends on your finance agreement and what you decide to do with the car at the end of the PCP.
Why Does Your PCP Mileage Limit Matter?
Your mileage allowance is an important part of how a PCP agreement is calculated.
When you take out PCP finance, the finance provider estimates what the car is likely to be worth at the end of the agreement. This is used to calculate the Guaranteed Minimum Future Value (GMFV), also known as the optional final payment or balloon payment.
Mileage is one of the factors that can affect a car's future value. A car expected to cover more miles will generally be worth less at the end of the agreement than an otherwise identical car with lower mileage.
That's why your PCP agreement includes an agreed mileage allowance. If you return the car after exceeding that allowance, the finance provider may charge you for the additional miles.
How Much Are PCP Excess Mileage Charges?
There isn't one standard excess mileage charge across all UK PCP agreements. The amount is set by the individual finance provider and agreement and can vary depending on the lender, vehicle and terms of the deal.
For example, Santander Consumer Finance currently gives an example of an excess mileage charge of 14.90p per mile, excluding VAT. Santander also states that its rate may increase if excess mileage exceeds 5,000 miles.
Other finance providers can use different rates. Current Toyota Financial Services PCP offers, for example, show excess mileage rates including 8p, 9p, 10p and 17p per mile on different vehicles and offers.
The most important figure is therefore the one in your own finance agreement. Check the excess mileage section before assuming how much you'll have to pay.
How Much Could Excess Mileage Cost?
Using Santander's example of 14.90p per mile before VAT:
- 500 excess miles: £74.50 + VAT
- 2,000 excess miles: £298 + VAT
- 5,000 excess miles: £745 + VAT
These are examples only. Your actual excess mileage rate and whether VAT is added will depend on your finance agreement.
For example, if a charge of 14.90p per mile before VAT applied and VAT were charged at 20%, 5,000 excess miles would amount to £894 including VAT.
Always check whether the rate shown in your agreement is inclusive or exclusive of VAT.
What Happens If You Exceed Your PCP Mileage Limit?
Going over your agreed mileage doesn't necessarily mean you need to pay the charge immediately.
In most cases, the excess mileage charge becomes relevant when you return the vehicle at the end of your PCP agreement. The finance provider will check the vehicle's mileage against the agreed allowance and calculate any applicable charge.
For example, if your PCP agreement allows 30,000 miles and you return the car with 35,000 miles, you've driven 5,000 miles over your agreed allowance.
If your contract charges 10p per excess mile, that would be £500. If VAT applies to the charge, the final amount would be higher.
Your own agreement is the definitive source for the amount you'll pay.
What Are Your Options If You've Gone Over Your PCP Mileage?
If you're approaching the end of your PCP and you've exceeded your mileage allowance, there are several possible routes.
1. Return the Car
If you simply return the car at the end of the PCP, the finance provider will assess the vehicle and record its mileage.
If you've exceeded your agreed mileage, an excess mileage charge may be applied in accordance with your contract.
You'll also need to make sure the vehicle meets the finance provider's standards for condition and fair wear and tear. Excess mileage charges are separate from potential charges relating to damage or condition.
2. Buy the Car
If you decide to keep the car, you can normally do so by paying the optional final payment set out in your PCP agreement, along with any other amounts required under the agreement.
When you buy the car rather than return it, the contractual excess mileage charge for returning the vehicle generally doesn't apply.
This can make buying the car worth considering if you've driven substantially more miles than expected. However, you should compare the cost of buying the car with its current market value and your other finance options rather than assuming it will always be the cheapest choice.
It's also important to remember that the mileage still affects the car's value. A higher-mileage car may be worth less if you later decide to sell it.
3. Part-Exchange the Car
You can also consider using the car as a part-exchange towards another vehicle.
Part-exchanging is different from simply returning the car under the PCP agreement. The dealer will value your vehicle and the outstanding finance will need to be settled as part of the transaction.
Higher mileage can affect the vehicle's market value, which could reduce the amount of equity available towards your next car.
Whether a separate excess mileage charge is payable will depend on how the existing finance agreement is settled and the terms of your contract.
For this reason, don't automatically assume that part-exchanging means you've simply avoided an excess mileage charge. Compare the finance settlement figure, the dealer's valuation and any applicable charges before making a decision.
Can You Change Your PCP Mileage Limit?
Usually, you can't simply change your agreed mileage allowance once your PCP agreement has started.
However, some finance providers may offer an amendment or another option if your circumstances change. This isn't guaranteed, and any change could affect the cost of your agreement.
If you realise that you're going to significantly exceed your mileage allowance, contact your finance provider as early as possible. Ask whether they can amend the agreement and, if so, what the additional cost would be.
Don't wait until the end of the PCP to find out what your options are.
What If You Exceed Your Mileage During the PCP?
It's worth checking your mileage throughout the agreement rather than waiting until the final few months.
For example, if your PCP allows 36,000 miles over three years, you can use that as a rough guide to monitor your progress. Your actual agreement is what matters, though, particularly if your mileage allowance isn't evenly distributed across the contract.
Keep an eye on:
- Your current odometer reading
- The mileage allowance in your agreement
- How much time remains on the PCP
- Any changes to your daily commute or driving habits
- The excess mileage rate in your contract
If you're already significantly over your expected mileage, contact your finance provider to discuss the options available to you.
Voluntary Termination and PCP Excess Mileage
Voluntary Termination (VT) is a legal right that can allow you to end certain regulated vehicle finance agreements early under the Consumer Credit Act 1974.
With a PCP agreement, the 50% figure is based on the total amount payable under the agreement, which includes the optional final payment. This means you may need to have paid more than 50% of the amount borrowed in order to reach the VT point.
If you've paid less than the required 50%, you may be able to make up the difference before exercising VT.
However, mileage is an important consideration.
Whether an excess mileage charge applies when you use voluntary termination depends on the terms of your finance agreement. Some agreements expressly provide for excess mileage charges when the vehicle is returned following VT, and disputes can arise over how these terms apply.
If you're considering voluntary termination and you've exceeded your mileage allowance, check the termination and excess mileage clauses in your agreement before proceeding. If you're unsure about your rights or the amount being requested, consider getting independent advice.
Does Excess Mileage Affect the Car's Value?
Yes. Mileage is one factor that can affect a used car's value.
You can value your car for free using Regit's free valuation tool.
A car with significantly higher mileage may attract a lower valuation than an otherwise similar car with lower mileage. This is particularly relevant if you're planning to buy the vehicle at the end of your PCP and sell it later, or if you're considering a part-exchange.
However, the market value of a car isn't determined by mileage alone. Age, condition, specification, service history, demand and wider used-car market conditions can all influence its value.
This is why it's worth comparing the numbers rather than assuming that an excess mileage charge or a lower part-exchange valuation will automatically be the cheaper option.
How to Avoid PCP Excess Mileage Charges
There's no guaranteed way to avoid excess mileage charges if you return a vehicle after exceeding the mileage allowance. However, planning ahead can help you reduce the risk of an unexpected bill.
Choose a Realistic Mileage Allowance
When taking out PCP finance, think carefully about how much you'll actually drive.
Consider:
- Your daily commute
- Regular work journeys
- School or family trips
- Holidays and long-distance journeys
- Changes you expect to make to your driving during the agreement
A lower mileage allowance may result in a different monthly payment, but choosing an allowance that doesn't reflect your likely driving could leave you with excess mileage charges later.
Check Your Mileage Regularly
Don't wait until the end of the agreement.
Checking your mileage once or twice a year can help you identify whether your driving is significantly different from what you originally expected.
If you're already on course to exceed the allowance, you'll have more time to speak to your finance provider and consider your options.
Check Your Finance Agreement
Your finance agreement should tell you:
- Your agreed mileage allowance
- The excess mileage rate
- Whether VAT applies
- When excess mileage charges become payable
- The conditions for returning the vehicle
- The terms covering voluntary termination
Keep your agreement somewhere you can easily access it. The exact terms of your PCP are more important than any general mileage figure you see online.
Compare Your Options at the End of the PCP
If you've exceeded your mileage, don't automatically assume that returning the car is your only option.
Compare the figures for:
- Returning the car and paying any applicable excess mileage charge
- Buying the car for the optional final payment
- Part-exchanging the vehicle
- Any other option offered by your finance provider
The right financial decision will depend on the terms of your agreement, the car's current market value and your plans for your next vehicle.
What Does Exceeding Your PCP Mileage Limit Mean for UK Drivers?
Exceeding your PCP mileage allowance doesn't necessarily mean you're facing an unavoidable financial disaster.
If you return the car, an excess mileage charge may apply. The amount varies between finance providers and individual agreements, so there is no single standard UK rate.
If you want to keep the vehicle, buying it can generally avoid the contractual excess mileage charge associated with returning it. Alternatively, part-exchanging the car may be an option, although its mileage can affect the dealer's valuation.
The most important thing is to understand the terms of your PCP before making a decision.
Start by checking your finance agreement for your agreed mileage and excess mileage rate. If your circumstances have changed, contact your finance provider before the end of the agreement to find out what options are available.
Want to know how much you still owe on your PCP? Use our PCP Settlement Calculator to estimate your outstanding finance and understand your options before deciding what to do with your car.