Leasing glossary
3+23 or 3+35
'3' determines that the deposit (initial rental) is 3 x the monthly payment. '23' or '35' determines how many monthly payments remain payable thereafter.
Be wary of deals that say something like 6+23. This will basically make the monthly payment look lower as you'll be paying a very high initial payment.
Balloon payment
A final payment of a leasing agreement - which is set at the start of the contract. It's only applicable on some types of finance agreements.
Breakdown recovery
A mobile repair and recovery service for instances when a vehicle will not start or has broken down.
BVRLA
British Vehicle Rental & Leasing Association. A body seeking to raise the standards of operation and service within the leasing industry.
Cherished plates
A personalised number plate.
CO2
Abbreviation of Carbon Dioxide. The amount a vehicle emits in g/km is used to calculate company car tax and road fund licence.
Consumer Credit Licence (CCL)
To comply with the law, finance businesses must have a credit licence to carry out certain activities in the field of credit and hiring.
Contract Hire
A finance agreement where you'll pay for the use of a vehicle and simply hand it back at the end of the lease.
Contract Purchase
A finance agreement where you'll pay for the use of a vehicle and have the option to purchase or hand the vehicle back at the end of the lease.
Depreciation
The loss in value of the vehicle as it is used.
Early termination fee
The amount you'll pay if you terminate the contract before the lease end date.
Excess mileage
When the mileage is over and above the miles originally specified on your finance agreement.
Excess mileage charge
A charge based on miles driven over the amount contracted in the lease agreement on return of a vehicle.
Excess wear and tear charges
Charges for damages to a leased vehicle that are greater than 'normal' or 'reasonable'.
Final rental/payment
The final vehicle rental transaction paid by the individual, company or firm leasing the vehicle within a finance agreement.
Finance acceptance fee
Usually paid by the customer at the start of a finance agreement, with the initial payment.
Finance Lease
A finance agreement where the vehicle is registered in your name. You'll pay for use of a vehicle and are responsible for a final balloon payment.
GAP insurance
If a leased car is written off, sometimes there can be a discrepancy between what an insurance company and the finance company say the vehicle is worth. If this cannot be resolved, the leasee is ultimately liable for the difference.
GAP insurance is an insurance policy to protect you from this.
Initial payment
It's similar to a deposit, but you don't get it back as it counts as the first payment for your leased vehicle. It's generally 3 x the monthly payment.
Lease Purchase
A finance agreement where you'll pay for the full value of a vehicle via monthly payments and pay a balloon payment at the end of the contract. At the end of the contract you'll own the vehicle.
Lease term
Length of the contract period - usually expressed in number of months. Typical leases last for 24, 36, or 48 months.
Leasing
A term referring to the "use" of a vehicle, by a customer entering into an agreement with a finance company.
Lessee
The vehicle hirer, customer or user of the vehicle who signed the lease agreement.
Lessor
The finance/leasing company or the legal owner of the vehicle.
Maintenance
Offered with finance agreements and includes routine maintenance and servicing, mechanical repairs and replacement parts, tyres and exhausts.
Mileage allowance / miles per annum
The maximum number of miles a leased vehicle can be driven per year without incurring a penalty. Usually 10,000 12,000 15,000 or 20,000.
Monthly payment / monthly rental
This is the scheduled monthly payment for the vehicle and any other extras selected such as maintenance etc.
P11d value
This refers to the vehicle price value when new, together with the additional cost of extras. The value is then used for taxation purposes by the Inland Revenue.
Peppercorn rental
A payment that you pay each year if you want to continue using the vehicle at the end of the contract (only applicable to Finance Lease).
Personal Contract Hire (PCH)
Offers all the benefits of Contract Hire to a private individual.
Personal Contract Purchase (PCP)
Offers all the benefits of Contract Purchase to a private individual.
Residual value
The vehicle's wholesale value at the end of the lease.
Road fund licence
Road tax
Underwriting
A process which a finance company goes through in order to decide whether to accept a company's / a private individual's proposal (being approved for credit).
