We have all been there. Also, we all haven't, but that is how estimates work. Those are just estimates. Our daily driving habits depend on multiple things like if we got a new job or if we moved to a different place. It is really hard to come up with a final and stable number, but that is what life is about: we estimate and just try to do our best. So, if you see that somehow your Km estimation won't be enough, here is what you should do: the math.
Don't Freak Out, it is OK
Either case, you are not breaking any law or contract. Your current lease free kilometers are just a variable on a deal you agreed with and that specifically included how much would be charged in the future if you went above it. Don't freak out, it is part of your contract and even if you overrun it, there is a clause for it.
Of course, you will have to pay for it so this is why the most important thing is that you do your math.
Do The Math
First of all, you need to know where you are so you can re-estimate what will happen in the near future. When you signed the contract (x months ago), you had an idea that has probably changed now, if you are reading this article.
The Variables
- Current Km: Your current Odometer reading. Let's assume a sample "lease takeover" from our Lease Takeover Marketplace.
- Monthly Original Km Allowance: This number will be originally either 20,000 km/year or 16,000, or any other. So you will divide it by 12 and will know how many per month.
- Total Months: Original Contract total months.
- Months Paid: How many months have passed since you originally started the contract.
- Remaining Months: Total Months - Months Paid
The Functions
- Current Km Rate: Current Km / Months Paid
You need to know how have you been doing. Maybe you went 4 times on family trips, something you do not expect to repeat that often or that far away. But you need to know how much "have you" used your free kilometers.
- Estimated Km at the End of Contract: Current Km + ( Current Km Rate x Remaining Months )
You need to know how much will be at the end of the contract. If you will be above, if you need to transfer your lease, if you can, in fact, do way more trips...
- Rate to Balance: ( TOTAL Original Km Allowance - Estimated Km at the End of Contract ) / Remaining Months
And this will be the most important number of all. The Rate to Balance will tell you how much more (or less) you will need to drive to return the vehicle with the total original agreement at the end. Basically, if you are negative, you will need to reduce and if you are positive, you can drive more.
Sample Vehicle (a 2019 Nissan Rogue S)
The Variables:
- Current Km: 19,000 km
- Monthly Original Km Allowance: 1,333 (16,000 km/year for a total of 80,000 km)
- Total Months: 60 months
- Months Paid: 20 months
- Remaining Months: 40 months
The Functions:
- Current Km Rate: Current Km / Months Paid = 19,000 km / 20 months = 950 km/month.
You notice it is under the original allowance of 1,333 km/month, so it is good.
- Estimated Km at the End of Contract: Current Km + ( Current Km Rate x Remaining Months )
- Estimated Km at the End of Contract: 19,000 km + ( 950 x 40 months )
- Estimated Km at the End of Contract: 57,000 km
Which is way under the 80,000 allowed. This means that you will return a vehicle with more Residual Value than the one estimated at the beginning of the contract.
- Rate to Balance: ( TOTAL Original Km Allowance - Estimated Km at the End of Contract ) / Remaining Months
- Rate to Balance: ( 80,000 km - 57,000 km ) / 40 months
- Rate to Balance: ( 23,000 km ) / 40 months
- Rate to Balance: 575 km/month extra
This means that you can drive an extra 575 km/month (6,900 km/year) on top of your current rate to return your vehicle at an estimated 80,000 km. Note that, almost 7,000 km is 5 trips to Niagara Falls from Montreal per year, just to mention an example (and also 1 trip to Florida every year).
Just be on top of the numbers and re-analyze all your options. If the Rate to Balance is negative, you will need to drive less and if it is too way negative, I strongly suggest you transfer your lease before it is too late.
