Glossary

The leasing industry is awash with jargon and acronyms! We want to be as transparent as possible so we’ve put together a handy glossary to help you out.​

Annual mileage

As part of your leasing contract you will agree to stick to an annual mileage limit. This is because the mileage you do is closely linked to the depreciation of the vehicle and the monthly fee you pay is for the depreciation of the vehicle over time. The annual mileage is normally anything from 5,000 to 50,000 miles per year.

Balloon payment

A feature of business contract purchase and personal contract purchase, this is a final payment that is agreed at the start of the contract but not made until the end. The payment is of higher value than your regular payment and once paid, you take ownership of the vehicle.

BIK (Benefit in Kind)

Benefit in Kind are benefits which employees receive from their employment but which are not included in their salary. If you use a company car for private use, you will have to pay Benefit in Kind tax.

Business contract hire (BCH)

A business contract hire agreement allows you to lease a vehicle for a set period of time, which is typically between 24 and 60 months. During that time you pay an agreed monthly fee and the vehicle is then returned at the end of the term.

Business contract purchase (BCP)

With business contract purchase you pay a fixed monthly payment with the option to buy the vehicle at the end of the contract term. Alternatively, you can part exchange the vehicle for a new one using any equity for the deposit, or you can return the vehicle (subject to mileage and condition).

Business lease purchase (BLP)

This option is similar to hire purchase, the difference being that an agreement to purchase the vehicle at the end of the term is made in advance, with no option for the purchaser to change their mind at the conclusion of the term.

BVRLA

The BVRLA is the trade body for the vehicle rental and leasing sector. It seeks to look after the interests of, and sets standards for operational quality for both the contract hire and leasing sectors and the daily rental sectors.

Contract hire

Contract hire is another word for leasing and is available on a business or personal basis.

Contract length

When you lease a vehicle, you can choose a contract length which is normally from one to five years. For the term of the contract you agree to pay a fixed amount each month.

Depreciation

The reduction of value of an vehicle over time.

Document fee

A fee that may be charged to process a vehicle’s paperwork.

Excess mileage charge

Mileage covered that is additional to that agreed in the contract. It always results in a charge to cover the additional servicing and depreciation costs it generates.

Fleet management

Fleet management refers to a service which helps to minimise the risks associated with vehicle investment, improve efficiency, productivity and reduce overall transportation costs. If you need six or more vehicles for your business, we can offer you a fleet management solution.

Funder

A funder is an organisation that provides finance for vehicles. We have partnerships with seven finance companies, so we can remain impartial, and have a choice between funders when it comes to securing finance on your lease.

GAP insurance

Guaranteed asset protection or GAP insurance is a financial product often sold if you buy or lease a brand-new car. If your car is stolen or written off (total loss), GAP insurance covers the difference between the current value of the car (the amount your car insurer will usually pay out) and the amount of outstanding payments you still owe.

Hire purchase (HP)

Hire purchase is a finance option for business and personal leasing customers. A deposit payment is agreed – typically a multiple of the monthly payment – and repayments will be calculated based on this figure, the value of the vehicle, and the length of the repayment term.

Initial payment

This is your first payment for your leased vehicle. It is usually calculated as one, three, six, nine or twelve months of your monthly rental. The higher the initial payment, the lower your subsequent monthly rental payments will be.

Lease purchase (LP)

Lease purchase is a similar finance agreement to hire purchase, the difference being that at the end of the contract, you can either make a balloon payment and take ownership of the vehicle, or you can choose to part exchange your vehicle – you make the balloon payment then lease a newer car.

Maintenance

Maintenance is an optional additional monthly cost that covers you for servicing, replacement tyres, and all costs associated with mechanical and electrical repairs as well as bulbs, batteries, exhausts and so on. Maintenance packages are available to both business and personal leasing customers.

Manufacturer warranty

All of our lease vehicles come with a manufacturer warranty which can range from one to five years. The warranty covers anything that is considered to be a manufacturing defect.

Personal contract hire (PCH)

Personal contract hire is also known as personal leasing. It works in the same way as business leasing but the prices are generally slightly more expensive as they include VAT. You pay a monthly rental to lease a car over a set period of time, typically between 24 – 60 months, with a flexible initial payment structure of either one, three, six, nine or twelve months which is paid after delivery. The vehicle is then returned at the end of the term.

Personal contract purchase (PCP)

Personal contract purchase is similar to personal contract hire (as you pay a monthly rental to lease a car), however you also have the option to purchase the vehicle at the end of the contract by paying a ‘balloon payment’. The amount of the balloon payment is agreed at the beginning of your contract.

Processing fee

The processing fee is an administration charge/set up fee that is implemented to cover the cost of processing the finance application & dealing with the contract documentation.

Residual value

An estimate of what the vehicle will be worth at the end of the contract.

Short-term lease

Short-term lease, or car subscription, is an alternative to traditional car leasing or buying, that provides you with a vehicle for a fixed monthly fee. This fee includes insurance, maintenance, servicing, and roadside assistance.

Wear and tear

A BVRLA guide that clarifies the definitions of fair wear and tear at the end of a lease. AMT adheres to this guide.