Kilometre Limits On Lease: what does it mean in Canadian car loans?

Kilometre limits on a lease, often referred to as mileage limits, define the maximum distance a vehicle can be driven over the entire lease term without incurring additional charges. This is a critical component of any Canadian vehicle lease agreement, typically expressed as an annual allowance (e.g., 20,000 km/year) or a total cumulative limit (e.g., 60,000 km for a three-year lease). Exceeding these pre-defined limits results in 'excess kilometre charges,' a per-kilometre fee (often ranging from $0.10 to $0.20) clearly stipulated in the lease contract. For Canadian consumers, understanding these limits is paramount because these charges can significantly inflate the total cost of the lease, potentially turning an otherwise affordable monthly payment into a substantial financial obligation at lease end. Under provincial consumer protection legislation, such as Ontario's Consumer Protection Act, lessors are legally mandated to provide clear and conspicuous disclosure of these limits, the per-kilometre charge, and the calculation method within the lease agreement itself. Furthermore, these excess charges are subject to applicable provincial sales taxes (HST, PST, or GST depending on the province) when billed, adding another layer to the financial impact. In the projected 2025 market, with evolving used car values, lessors rely heavily on these limits to protect the vehicle's residual value, making accurate estimation of driving habits essential for borrowers to avoid costly surprises and ensure the lease remains financially viable.