Leasing Glossary
The leasing industry loves its jargon. Here's all of it, translated into plain English.
- Annual mileage allowance
- The number of miles per year you agree to drive, which helps set your monthly rental. Exceeding the total over the contract triggers excess mileage charges.
- Appointed Representative (AR)
- A firm that carries out regulated activities under the responsibility of another firm ("the principal") which is directly authorised by the FCA. Albany Leasing is an Appointed Representative of Wessex Fleet Solutions Ltd.
- BCH (Business Contract Hire)
- Contract hire taken out by a business - limited company, sole trader, partnership or LLP - with rentals paid by the business and VAT typically recoverable in part or full.
- BIK (Benefit in Kind)
- The tax a company car driver pays for the private use of a vehicle provided by their employer. Calculated from the car's P11D value, its CO2 emissions and the driver's income tax band. Electric cars currently enjoy very low BIK rates.
- Broker
- An intermediary (like us) who arranges lease agreements between customers and finance companies, using a panel of funders and a dealer network to source competitive deals. Brokers are credit brokers, not lenders.
- BVRLA
- The British Vehicle Rental and Leasing Association - the industry trade body. Its Fair Wear and Tear Guide is the standard for assessing vehicle condition at handback, and its conciliation service helps resolve disputes. We are a BVRLA broker member.
- Contract hire
- The formal name for the leasing product: a fixed-term hire agreement on a brand-new vehicle with no option to purchase at the end.
- Credit check
- The finance company's assessment of your credit history and affordability before approving your application, carried out with credit reference agencies.
- Early termination
- Ending a lease before the contract term finishes. Usually incurs a charge set by the funder, commonly a substantial proportion of the remaining rentals.
- Excess mileage charge
- A pence-per-mile charge applied at contract end if the vehicle has exceeded its total contracted mileage. The rate is stated in your finance agreement.
- Fair wear and tear
- The deterioration expected from normal use of a vehicle, as defined by the BVRLA guide. Fair wear and tear is accepted at handback; damage beyond it may be charged.
- Funder / finance provider / lender
- The finance company that buys the vehicle and hires it to you. We arrange your agreement with a funder from our carefully selected panel.
- GAP insurance
- Guaranteed Asset Protection - optional insurance covering the shortfall between an insurer's write-off payout and the amount outstanding on your finance agreement.
- Initial rental
- The upfront payment at the start of a lease, usually a multiple of the monthly rental (1, 3, 6, 9 or 12 months' worth). It is part of the total cost paid early - not a refundable deposit.
- In-stock vehicle
- A vehicle already built and available at a dealer, deliverable within weeks rather than the months a factory order can take.
- Maintenance package
- An optional fixed monthly addition covering routine servicing, non-warranty repairs, wear items and usually tyres for the duration of the contract.
- OTR (On the road) price
- A vehicle's full price including delivery, registration, number plates and first road tax - the basis from which lease pricing starts.
- P11D value
- The list price of a car including VAT, delivery and options (but excluding first registration fee and road tax), used to calculate company car BIK tax.
- PCH (Personal Contract Hire)
- Contract hire for private individuals: fixed monthly rentals including road tax, with the vehicle returned at contract end. The personal equivalent of BCH.
- PCP (Personal Contract Purchase)
- A different finance product to leasing: lower monthly payments with a large optional final "balloon" payment if you decide to buy the car. Unlike contract hire, PCP offers a route to ownership.
- Processing / arrangement fee
- The fee we charge for our brokerage services - sourcing the vehicle, arranging the agreement, and supporting you through the lease. Disclosed on every quote before you commit; see our information notice.
- Residual value
- The funder's forecast of what the vehicle will be worth at contract end. The difference between the new price and residual value is the depreciation your rentals fund.
- Road fund licence (RFL)
- Another name for road tax / Vehicle Excise Duty. Included in your lease for the contract duration at the initial rate; if the Government raises rates mid-contract, the increase may be passed on.
- Term
- The length of the lease contract, usually 24, 36 or 48 months.