GLOSSARY OF TERMS
A B C D E F G L M N O P Q R S T W
A
Advance Rental
An initial payment of up to 50% of the total rental value. There is no upper payment limit on Personal Contract Purchases.
B
Balloon Payment
A feature of Contract Purchases and Personal Contract Purchases, this is a final payment that is agreed at the start of the contract but not made until the end.
BIK (Benefit in Kind)
For tax purposes, we supply a ‘List Price’ that includes:
- VAT
- The list price of options and extras including VAT,
- and the manufacturer’s delivery charge on the day before the vehicle is delivered.
HM Revenue and Customs uses the List Price to assess the amount of tax that is payable on a company car.
Our ‘List Prices’ are guides and, if customers have any queries, they should speak to their accountants or financial advisors.
Blocked VAT
Limited companies and non-government customers can claim back 50% of the VAT on their finance rental and 100% of the VAT paid on their service agreement.
Blocked VAT only applies to cars where there is an element of private usage and it refers to the total rental payable after VAT has been reclaimed.
BVRLA (British Vehicle Rental & Leasing Association)
The trade organisation for companies such as FVL.
C
CAP Current Auction Price
The leasing and rental industry’s independent current market evaluation system that also forecasts Residual Values.
Capital Cost
The On-the-Road Price excluding the Road Fund Licence costs.
CCA Consumer Credit Act 1974
The legal protection for individuals, unincorporated companies and partnerships. Regulated Credit Agreements must have a cooling off period during which they can be cancelled.
CO2 Carbon Dioxide
The amount of CO2 that a car emits affects the amount of company car tax and Road Fund Licence that it attracts.
An ‘Off Balance Sheet’ funding method where a company hires a vehicle for a specified period and makes regular payments. The funder retains ownership and its associated risks.
An ‘On Balance Sheet Method’ otherwise similar to Contract Hire but where the customer can buy the vehicle, for a pre-determined amount (balloon payment), at the end of the contract or exercise their option to return the vehicle provided the Sales Agency Agreement is in place.
D
Delivery Note
A document signed when the customer takes delivery of a vehicle. Its date normally signals the start of the agreement and monthly payments begin one calendar month later.
Delivery Costs, Supply Costs
The charge a dealer makes for delivering a vehicle to his customer. It forms part of the On-the-Road price.
Depreciation
The value that an asset loses as it is used. In effect, the difference between the purchase price of a vehicle and its worth at the end of the contract. Vehicles depreciate steeply in their first 18 months.
E
Early Termination
When a customer ends a contract before scheduled, the finance company will levy a charge according to specific circumstances. Commonly this equates to the return of the vehicle and payment of 50% of outstanding rentals
Excess Mileage
Mileage covered that is additional to that agreed in the contract. It always attracts a charge to cover the additional servicing and depreciation costs it generates.
F
Fair Wear & Tear Guide
A BVLA guide that clarifies the definitions of fair wear and tear at the end of a lease. FVL adheres to this guide.
Finance Rental
The finance element of the rental payments. It includes the Road Fund Licence in Contract Hire.
First Registration Fee
A government levy (currently £50) to cover the costs of registering new vehicles.
Formal Extension Secondary Period
A period of 3 or more months for which a customer may chose to extend their contract. The funder may consider granting short informal extensions to contracts.
Funder
The finance company used to provide the funds for the lease/purchase of the vehicle.
G
Gap Insurance
A policy to cover any difference (up to £7 500) between the finance outstanding on a vehicle and the sum offered by an insurance company if the car is written off.
L
Lessor
The finance company with whom you have the agreement and the owner of the vehicle.
M
Maintenance
The funder offers maintenance agreements that include routine servicing, repairs, replacement parts, tyres, batteries and exhausts. The funder is not obliged to make repairs that arise from accidental, deliberate or negligent damage to the vehicle.
Manufacturer’s Delivery Charge.
The charge levied by the manufacturer for delivery of the new vehicle to the supplying dealership. This is used to calculate the BIK price and may differ from the supply cost.
Manufacturer’s List Price
This is a basic price, before options, VAT or discounts.
Master Hire Agreement
The agreement that the customer and the funder both sign at the start of their relationship. Generally only used when multiple vehicles are being ordered over a period of time.
MGFV Minimum Guaranteed Future Value
The percentage of the car’s initial value that will still be recognised at the end of the contract. This value is guaranteed by the funder provided the vehicle is within the age and mileage parameters set at the start of the contract.
O
On-the-Road Price
The full sum that FVL pays the manufacturer for the vehicle. Here’s the calculation:
- The Manufacturer's List Price
- - The price of Options
- + The price of Options
- + The Delivery Charge
- + VAT
- + The Registration Fee
- + The Road Fund Licence
- = On-the-Road-Price.
P
PCH - Personal Contract Hire
Offers the benefits of Contract Hire to individuals.
PCP - Personal Contract Purchase
Offers the benefits of Contract Purchase to individuals.
Pooled Mileage
Pooled Mileage terms are negotiated in the master agreement between the funder and customers who contract several vehicles.
Purchase Price
The price at which the funder will sell a vehicle at the end of the contract. The contract holder cannot buy the vehicle themselves and or through a third party.
Q
Qualifying
If a vehicle is not used for any personal purposes, it will qualify for 100% VAT Relief.
R
Regulated Agreement
Where the total of all the rentals/payments including VAT is less than £25,000.00.
Relief Vehicle
The funder will provide those customers, who select this option, with a car to use while their own is off the road.
RV Residual Value
An estimate of what the vehicle will be worth at the end of the contract.
S
Sales Agency Agreement
This is an option exercised at the start of Contract Purchase agreements. It allows the customer to exercise their options, namely to return or keep the vehicle at the end of the contract. Without it, they would have to make the balloon payment and keep the car.
Service Rental
The element of rental that covers the vehicle’s maintenance, relief vehicle (if selected) and breakdown services. With a Contract Purchase, the service rental also includes the Road Fund Licence.
Sale & Leaseback
The funder can buy a customer’s fleet and then lease it back to them. It allows customers to release equity tied up in vehicles and enjoy the benefits of Contract Hire.
Spread Rental
A payment profile that spreads rentals over the life of the contract and means that there is no rental-free period at the end of the contract.
T
Terminal Pause
The rental free period at the end of a contract that is facilitated by the advanced payments at the start of the contract.
W
Written Down Allowance
A Capital Allowance for people using the vehicle to carry out a trade. The lease will include a clause making it clear that the lessor or owner will claim this capital allowance.
