An Excess Mileage Charge is a fee that some finance companies may charge you at the end of a Personal Contract Purchase (PCP) agreement if your actual annual mileage exceeds the agreed-upon limit when you first signed the contract. This limit, often specified in miles per year, can significantly affect your monthly payments and overall cost.
For example, let's say you enter into a PCP agreement with an annual mileage limit of 10,000 miles. If you drive more than this amount during the term of the agreement, you could be charged for each mile over the limit when you return the car or decide to buy it outright at the end of your contract. This charge is typically a set rate per mile, such as £5 for every extra 1,000 miles driven.
Understanding and adhering to this mileage cap matters because going over can add substantial costs to your final bill. It's important to carefully consider how many miles you drive each year when selecting a PCP agreement. Misunderstanding or underestimating your annual mileage needs could lead to unexpected expenses at the end of your contract, which might impact your budget and financial planning.
In the UK, while there is no specific legislation governing excess mileage charges, these fees are part of standard finance agreements that must comply with consumer credit regulations. The Consumer Credit Act 1974 ensures transparency in financing arrangements, but it's up to you as a borrower to read and understand all terms before signing any agreement.
A practical tip: Always ensure the agreed annual mileage limit fits your driving habits realistically. If possible, choose a higher mileage option or negotiate with the lender if you think you might exceed the stated limit. This way, you can avoid facing unexpected costs at the end of your contract.
How This Relates to the FCA Redress Scheme
The FCA motor finance redress scheme covers 12.1 million agreements with an average compensation of £829 per agreement. The total cost to firms is £9.1 billion. If you had PCP or HP finance between 6 April 2007 and 1 November 2024, you may be eligible. The final deadline to complain is 31 August 2027. You do not need a claims management company.