If your business uses Contract Hire (business leasing), agreed annual mileage is one of the single biggest drivers of your monthly payments — and the key reason you may face charges when the vehicle is returned. This guide explains how mileage is measured, how excess‑mile fees are calculated, example scenarios, and practical steps to reduce costs. Ready to compare tailored quotes? Get Quote Now — Free Eligibility Check.

Quick summary

Agreed annual mileage directly affects the vehicle’s estimated residual value at the end of a Contract Hire term. Higher agreed mileage lowers residual value and raises monthly payments; lower agreed mileage increases residual value and reduces monthly payments but increases the risk of excess‑mile charges at contract end. Excess charges are calculated as (actual miles − agreed total miles) × per‑mile rate. To reduce cost: estimate realistic use, choose the right mileage band, consider flexible lease options or finance types, and track mileage during the contract. For tailored options, Get a Free Eligibility Check.

What is Business Contract Hire (BCH)?

Business Contract Hire is a commercial lease where a business rents a vehicle for a fixed term and agreed annual mileage. Monthly payments cover the vehicle’s depreciation and any service package if included — you don’t own the vehicle and must return it at the end of the term subject to the lease contract’s terms.

Key features relevant to mileage:

• Agreed annual mileage and term determine the expected total miles the vehicle will cover during the lease.
• Residual (balloon) value at contract end is set assuming that mileage — more miles generally reduce the residual value.
• Maintenance packages can cover mechanical repairs and may affect return condition charges but won’t remove excess‑mile fees.

Important: This page does not give tax or accounting advice — check with your accountant or the lender for VAT and tax treatment. If you want tailored provider matches, Get Quote Now — Free Eligibility Check.

Why mileage matters to BCH payments

Monthly BCH payments are driven primarily by depreciation — the difference between the vehicle’s price and the expected residual value at the end of the lease. Lenders and leasing companies set the residual value based on the vehicle model, market forecasts and, crucially, the agreed mileage.

How it works:

• Higher agreed mileage → lower projected residual value → more depreciation to cover → higher monthly payments.
• Lower agreed mileage → higher residual value → less depreciation → lower monthly payments.

Typical mileage bands (examples only): 5,000; 8,000; 10,000; 12,000; 15,000; 20,000 miles per year. Leasing quotes will often be shown for specific bands — moving up a band increases monthly cost but reduces the chance of excess charges.

Example (illustrative):

• 3‑year BCH, 10,000 miles/year — higher residual than 20,000 miles/year — therefore lower monthly payments than the 20k option.

Want brokers to compare realistic mileage options for your business? Free Eligibility Check.

How excess‑mile charges are calculated

An excess‑mile charge applies when total actual mileage at vehicle return exceeds the agreed total mileage for the contract.

Calculation steps:

1. Agreed annual mileage × contract years = agreed total mileage.
2. Actual mileage at return − agreed total = excess miles (if positive).
3. Excess miles × per‑mile rate = excess‑mile charge payable.

Per‑mile rates vary by lease company, vehicle type and market conditions. Illustrative example ranges you might see (subject to lender terms): around 6p–25p per mile — small light commercial vehicles and small cars tend to be at the lower end, high‑value vans and specialist vehicles toward the higher end.

Worked example

3‑year BCH, agreed 10,000 miles/year → agreed total = 30,000 miles. Actual odometer at return = 36,500 miles → excess = 6,500 miles. If the per‑mile rate is 12p: 6,500 × £0.12 = £780 excess charge.

Factors that influence the per‑mile rate:

• Vehicle make and model (used market demand and depreciation curve).
• Contract length (longer terms may increase uncertainty).
• Residual value risk for the lessor (specialist vehicles often cost more per mile).
• Negotiated terms or fleet agreements — larger fleets may secure lower excess rates.

All figures in examples are illustrative — final charges are set by the lease provider and documented in your agreement.

Payment vs excess trade‑off: illustrative scenarios

Choosing mileage is a trade‑off between monthly cost and the risk of paying excess charges at the end.

Scenario A — Lower agreed mileage (10,000 miles/yr)

• Monthly payment: Lower (e.g., £300/month)
• Risk: High if actual use exceeds 10,000/yr — excess charges may apply
• Outcome if you exceed: You may pay significant per‑mile fees at return

Scenario B — Higher agreed mileage (15,000 miles/yr)

• Monthly payment: Higher (e.g., £330/month)
• Risk: Lower likelihood of excess charges
• Outcome: Predictable running cost spread across term

Numeric comparison (simple illustration):

• Scenario A: £300 × 36 months = £10,800; excess at return (if 6,500 miles over at 12p) = £780; total = £11,580.
• Scenario B: £330 × 36 months = £11,880; excess = £0; total = £11,880.

In this example, if you only exceed a little, Scenario A remains cheaper; if you exceed a lot, Scenario B may be better. The correct choice depends on realistic mileage forecasts for your business.

Options if you expect to exceed your mileage

If you anticipate higher usage, consider these options early — ideally before signing the contract or well before the return date.

• Agree a higher mileage band at the start: Increases monthly payments but reduces end‑of‑term excess charges.
• Negotiate a mid‑term mileage amendment: Some providers allow changes (this usually adjusts monthly payments).
• Purchase additional miles up front: Some lessors let you buy blocks of additional miles at a discounted rate compared with excess charges.
• Switch finance type: Hire Purchase or Lease Purchase transfers ownership risk — excess mileage charges don’t apply but other costs/benefits differ.
• Choose flexible leasing products: Some providers offer tolerance bands or short‑term top‑up options for fleets.
• Negotiate before return: If you’re slightly over, contacting the lessor early may let you settle for a negotiated fee or buy extra miles cheaper.

Practical tip: track odometer readings during the contract and forecast expected end‑of‑term miles so you can act in time.

Need specialist broker support to compare these approaches? Get Started — Free Eligibility Check.

Tips to reduce mileage costs

Operational and contractual strategies can reduce total cost:

• Implement route planning, scheduling and multi‑drop optimisation to cut unnecessary miles.
• Use telematics to monitor usage and driver behaviour — data helps forecast and control mileage.
• Consolidate deliveries or use a central pool vehicle to reduce duplicate journeys.
• Align contract length and mileage to realistic business usage — avoid optimistic low mileage estimates.
• Ask leasing companies for the exact per‑mile excess rate and rounding rules before signing.
• Consider maintenance packages to avoid return condition charges unrelated to mileage.

Before signing a lease, check the small print: how multiple drivers, hire usage or specific job types are treated.

Fleet vs single vehicle considerations

Fleet contracts often offer more flexibility:

• Volume discounts on monthly payments and lower excess‑mile rates are common for larger fleets.
• Fleet lessors can provide bespoke mileage profiling and mid‑term adjustments.
• Centralised telematics and pooled mileage allowances reduce per‑vehicle overrun risk.

If you manage multiple vehicles, a broker who specialises in fleets can often negotiate more favourable mileage terms. We can match you with specialists — Free Eligibility Check.

Compliance, tax and accounting notes (non‑advice)

Important points (for guidance only):

• UK Business Loans introduces businesses to lenders and brokers — we do not provide or underwrite finance. Submitting an enquiry is an information step to help match you with providers.
• Tax and VAT treatment of Contract Hire varies by business use and contract terms. Consult your accountant or the lender for authoritative advice.
• Figures and examples on this page are illustrative — final quotes and excess rates are set by leasing companies and documented in your contract.

How UK Business Loans helps

We’re a specialist introducer that connects UK businesses needing vehicle finance with lenders and brokers who can provide tailored Contract Hire and fleet solutions. Our process is quick and free: complete a short enquiry and we’ll match you with partners who understand your sector and mileage profile.

We typically work with business finance requests from around £10,000 and upwards. The enquiry form is not a loan application — it simply provides information to match you to appropriate providers. Get Quote Now — Free Eligibility Check.

Looking for broader vehicle funding options? Learn more about our vehicle finance partners and solutions such as vehicle finance.

Frequently asked questions

What happens if I exceed my agreed mileage?

At return the lessor calculates excess miles (actual minus agreed total) and applies a per‑mile rate. You’ll be invoiced for the excess miles. If you expect to be over, contact the lessor or a broker before return to explore options.

Can excess mileage be negotiated?

Yes — sometimes. You can buy additional miles before return or negotiate a mid‑term amendment. Fleet deals often allow more flexibility. Early contact gives you the best chance of a favourable outcome.

How much does excess mileage cost per mile?

Costs vary by vehicle and lessor. A safe illustrative range is 6p–25p per mile. Always request the exact per‑mile rate in writing before signing.

Can I change my agreed mileage mid‑contract?

Some providers permit changes but this normally adjusts monthly payments and must be agreed in writing. Speak to your leasing company or a broker to check feasibility and costs.

Does maintenance affect excess charges?

Maintenance packages cover wear and tear repairs but do not remove excess‑mile fees. They can, however, reduce other end‑of‑lease charges for vehicle condition.

Next steps — Get a quote now

Estimate your realistic annual mileage, note your preferred contract length and vehicle type, then complete our short enquiry — it takes less than two minutes. We’ll match you with lenders and brokers who can provide quotes and advise on the right mileage band for your business. Get Quote Now — Free Eligibility Check.

UK Business Loans introduces businesses to finance partners. We do not provide or underwrite finance. Submitting your enquiry provides information to help match you to lenders/brokers and is not an application. Offers and final terms are decided by the lender/broker.