Operations

FINANCE Q&A: What You Should Know About Mileage Caps

Posted on January 28, 2010

DON COOLBAUGH: Expert answers questions on vehicle leasing in tough credit and loan environment.

QUESTION: Do vehicle leases for commercial transportation have mileage caps? If you go over these caps, how much is it typically per mile?

ANSWER: The short answer is -- it depends. Many commercial leases are structured with $1 or $101 residuals. These are considered capital leases or finance leases and there is no mileage penalty since you own the vehicle at the end of the lease. But if you have an operating lease (typically your residual is 20% or greater of the capitalized cost), mileage penalties range from 15 cents to 25 cents per mile. Read the mileage penalty clause in your contract closely so you know what you are committing to.

Expert Don Coolbaugh, vice president of sales, Advantage Funding Inc., writes a weekly series of questions and answers for chauffeured transportation operators on all matters related to financing and leasing fleet vehicles.  E-mail finance and leasing questions to: [email protected] 

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