Mileage Limitation

Mileage limitation refers to a restriction set by a lender on the number of miles a borrower can put on a vehicle financed through an auto loan. It is used to predict the future value of the vehicle and protect the lender's investment.

Example #1

For instance, if a borrower agrees to a mileage limitation of 12,000 miles per year on a car they are financing through an auto loan, exceeding this limit may result in additional fees or penalties.

Example #2

Another example is if a borrower leases a vehicle with a mileage limitation of 15,000 miles per year, going over this limit can lead to extra charges at the end of the lease term.

Misuse

Misusing mileage limitation can occur if a lender sets an unreasonably low limit that is difficult for borrowers to stay within. This could lead to unexpected fees or limits on usage, unfairly burdening the borrower. It's important to safeguard against such misuse to ensure borrowers are treated fairly.

Benefits

The benefit of mileage limitation is that it helps ensure the value of the vehicle remains closer to the predicted amount at the end of the loan or lease term. This can be advantageous for borrowers who plan to trade in or sell the vehicle in the future, as maintaining lower mileage can help preserve the vehicle's resale or trade-in value.

Conclusion

Mileage limitation in auto financing serves as a tool to protect both the lender and the borrower. By setting reasonable limits, lenders can safeguard their investment, while borrowers can potentially benefit from maintaining a vehicle's value. It's essential for both parties to understand and agree upon the terms of the mileage limitation to avoid any disputes or unexpected costs.