PCP Excess Mileage Charges: How to Calculate Your Bill

Your estimated PCP excess mileage bill is miles above the agreed allowance × the contract charge per mile. Check whether the rate includes VAT and which period the allowance covers.

That calculation is most useful when you plan to return the car at the normal end of the agreement. Buying it, part-exchanging it or ending the agreement early can change how mileage is dealt with.

Collect the contract figures

Start with your signed agreement and any later written changes. A mileage figure in an advert for a similar car is not enough. You need:

• The mileage recorded when your agreement began.
• Your annual allowance and, where stated, the total contract mileage allowance.
• The agreement length and planned return date.
• The excess mileage rate, including any different rate above a particular threshold.
• Whether that rate includes VAT or has VAT added.

Check how the lender defines its figures. A total allowance for miles you may drive is different from a maximum permitted odometer reading. This matters particularly on a used car, which already had miles on the clock when you collected it.

For example, an annual allowance of 8,000 miles over exactly three years normally suggests 24,000 miles of use. However, use the total and measurement rules in your agreement. Do not assume a 37-month contract is simply three full years, or that an annual limit can always be averaged across the term.

Worked calculation: a £450 return bill

Suppose a used car PCP has the following terms. These are illustrative figures, not a lender quote:

• Starting odometer reading: 12,000 miles.
• Term: exactly 36 months.
• Annual allowance: 8,000 miles.
• Total permitted use over the contract: 24,000 miles.
• Odometer reading at return: 40,500 miles.
• Excess mileage rate: 10p per mile, including VAT, with no higher-rate band.

The car has travelled 40,500 − 12,000 = 28,500 miles during the agreement. Deduct the 24,000-mile allowance and the excess is 4,500 miles. The estimated charge is therefore 4,500 × £0.10 = £450.

You could reach the same answer by adding the starting mileage to the permitted use: 12,000 + 24,000 gives a maximum return reading of 36,000. The actual reading of 40,500 is 4,500 miles above that.

Subtracting the allowance directly from the final odometer reading would wrongly include the 12,000 miles driven before your agreement. Similarly, charging against just one year's 8,000-mile allowance would produce the wrong end-of-term estimate.

If the rate is quoted before VAT

If a contract instead quotes 10p per mile plus 20% VAT, the effective rate is 12p. The same 4,500 excess miles would then cost £540. Do not add VAT again to a rate already described as VAT-inclusive. If the paperwork is unclear, ask the lender to confirm the rate you will actually pay.

Forecast the cost before return

Take a dated photograph of today's odometer. Subtract the starting reading, then add a realistic estimate of the miles you will drive before return. Include any planned holiday, change of workplace or regular journey that is not reflected in your recent driving.

If the worked example's driver has six months left and expects the £450 bill, setting aside £75 a month would cover that estimate. Keep checking the forecast: it is a budget, not a fixed invoice.

Ask whether your lender allows the mileage allowance to change during the agreement. Get a written quote showing the extra payments, any fee and the revised total allowance. Compare the total cost of that change with the expected excess mileage charge. An amendment is not automatically available or cheaper, and it may have a deadline.

Buying or part-exchanging instead of returning

Returning the car at the agreed end: the lender normally checks mileage against the return terms. Damage, missing items or other outstanding amounts may be billed separately. Being within the mileage allowance does not settle those issues.

Paying the optional final payment: normal PCP return mileage charges generally do not apply when you buy the car and complete the required payments. Confirm this with your lender, including the treatment of any mileage charges already raised. Higher mileage can still reduce the car's resale value.

Part-exchanging: establish whether the dealer is buying the car and settling the finance, or arranging a contractual return to the lender. Those are different transactions. A dealer's valuation may reflect high mileage even where no separate return charge is payable. Ask for the valuation, settlement amount and any shortfall in writing.

Our guide to what happens when car finance ends covers those choices in more detail. Compare their full costs rather than paying a large balloon payment solely to avoid a smaller mileage bill.

Returning the car early

Do not use the full-term allowance without checking what happens on early termination. Some agreements reduce the permitted mileage in proportion to the time you have had the car.

Statutory voluntary termination is also different from a normal end-of-term return. Excess mileage charges in these cases can be disputed, and neither “always payable” nor “automatically wiped out” is a reliable rule. The agreement's wording, when liability arose and the circumstances matter. The Financial Ombudsman has considered and upheld mileage charges in some voluntary termination cases.

Before acting, request the lender's proposed calculation and read about voluntary termination. Seek independent advice if you disagree with the amount or the basis for charging it.

Check the lender’s invoice against your calculation

Compare the invoice with your starting and return readings, allowance, rate and VAT wording. Ask for an explanation of any pro-rating or higher-rate band. Keep the collection report and odometer photograph, particularly if collection was delayed.

If something is wrong, raise a formal complaint with the finance company and show your calculation. Explain any assurance made when the agreement was sold, supported by emails or other records. A disputed charge is not automatically cancelled; keep track of the lender's response and any payment arrangements while it is reviewed.