What is Lease Kilometre Allowance?

The lease kilometre allowance is the maximum distance a customer can drive a leased vehicle each year without incurring extra charges. Common Canadian allowances are 16,000, 20,000, or 24,000 kilometres per year, set in the lease contract. Driving beyond the total allowance over the lease term triggers a per-kilometre overage charge, often 10 to 25 cents each, payable at lease return. Because residual values assume a certain amount of wear, the allowance directly affects the monthly payment: a higher allowance means a lower residual and a higher payment. Canadian F&I managers should match the allowance to how the customer actually drives, since underestimating it leads to painful bills at return, while overestimating it means paying for kilometres never used.