Unlimited mileage leases are a (currently legal) fraud
Finance Lease is an increasingly popular method of funding a vehicle. A finance lease can be a great way for a business or sole trader to operate a new van when correctly structured. Unfortunately, many dealers/brokers in the market place are so desperate or greedy to make sales that they will tell you that the mileage you can do under a finance lease agreement is ‘unlimited’. Very often, these people will not even ask you what mileage you are likely to do in the vehicle! In our opinion, this is a serious example of mis selling and is no better than a fraudulent confidence trick.
Why is there no such thing as an unlimited mileage lease?
It is correct that the mileage you do in a vehicle over the term of the agreement is not legally part of the finance lease contract you sign. However, the final, terminal or “balloon” payment is calculated based on the forecast value of the vehicle at the end of the contract. Obviously the more miles on a vehicle at the end of the contract then the less it will be worth. The unscrupulous broker will base their quotes on the lowest mileage possible. This makes it seem as if they are offering the best deal. Well, it may be the best deal for them but it is unlikely to be the best deal for you!
Let’s work through an example:
You take a vehicle on a four year lease with a balloon payment of £7,000. You do 20,000 mile per year but the supplier did not ask you about this or if they did then they chose to ignore your answer. “Don’t worry the mileage is unlimited” they say. But they have based the balloon payment on an average annual mileage of 10,000. When the contract ends and you have a vehicle with 80,000 miles on the clock you will find that the vehicle is only worth a fraction of the balloon payment - say £3,500. It is you who has to find the shortfall or negative equity – not the dealer/broker who mis sold the deal. Any dealer/broker who would put you in this sort of position is probably long gone anyway. How does “unlimited mileage” look now?
The reason a dealer/broker would do this is simply to try to appear cheaper than their competitors and to trick you into thinking they are doing you a better deal.
How can you protect yourself from dishonest dealers / brokers?
At best dealer/brokers who are promoting and selling unlimited mileage leases are acting immorally, at worst they are being downright dishonest.
To protect yourself from the dishonest dealer/broker ask the following questions:
- Why haven’t you asked me what mileage I will be doing in the vehicle?
- What mileage did you use to set the balloon/final/terminal payment?
- Why do you need to know the mileage, if the deal is unlimited mileage?
- What happens if I go over the mileage?
Unlimited mileage leasing with a balloon is a confidence trick!
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