Your Plain English Guide To Leasing
At FVL we like to speak plain English. To help you find a contract which is right for you, we've prepared this glossary to frequently used car leasing and contract hire terms to help cut-through all the jargon.
A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z
Car Leasing A through Z
Please See ‘Initial Rental’
With a car lease, you don’t have to worry about paying anything further at the end of the contract. Balloon payments (or guaranteed future values) are 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. These are not present with a car lease – you won’t own the car after a car lease.
BIK (Benefit in Kind)
For tax purposes, we supply a 'List Price' that includes:
• 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.
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.
CAP - Current Auction Price
The leasing and rental industry's independent current market evaluation system that also forecasts Residual Values for dealers and lenders alike.
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.
At the end of the lease, if you are handing your vehicle back, you will be responsible for arranging collection. Usually you need to allow around a fortnight for this to be booked in and the lender (or their contractor) will come and collect the vehicle for free. Depending on your lender FVL can maybe do this for you, if not you can contact your lender directly yourself.
A funding method where a company or individual hires a vehicle for a specified period of time and agreed mileage and makes regular rental payments through a contract. The funder retains ownership of the vehicle and its associated risks.
Customer Maintained Lease
A customer maintained lease is when you are responsible for the service, maintenance, tyres and general upkeep of the vehicle whilst in your possession. This includes MOT tests and any repairs should the vehicle fall out of warranty. See also Lender Maintained.
Delivery and Delivery Charges
The charge a dealer makes for delivering a vehicle to the client. It forms part of the On-the-Road price. In most cases you don’t need to worry about this as FVL supply to the UK mainland for free.
Delivery is usually driven by driver to your home or work. Sometimes the supplier will use a transporter or a flatbed truck as it suits them, but this is rare. And in certain circumstances you can pay to collect the vehicle, or have it transported just ask your account manager if this is of interest to you.
The delivery mileage is not taken from your contracted mileage allowance!
Once you have inspected your new car and you’re completely satisfied, it’s time to sign the delivery note and accept the vehicle. Its date normally signals the start of the agreement and monthly rentals begin one calendar month later. Your Initial Rental will usually be taken around 5 to 10 working days after delivery. You need to sign your signature to match your driving license/finance documents.
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.
With car leasing the lender is taking on the depreciation risk. This is one of the benefits to you.
Should you need to end your contract before scheduled, the vehicle lender will levy a charge according to specific circumstances. Commonly, but not always, this equates to the return of the vehicle and roughly a payment of 50% of outstanding rentals.
Now more than ever electric vehicles are becoming increasingly important. An electric car is the same as a standard car only it’s powered purely by electricity. They will come with a large battery pack that must be charged regularly, like would fuel your fossil fuelled car (only usually a lot slower).
The benefits of these are that they deemed to be zero emission, as there is no exhaust. They can also be very powerful in comparison to their fossil fuelled-powered counterparts. The draw back is that people can get ‘range anxiety’ from running out of charge without knowing where the next charge point may be. Check out Electric vehicle section for more information.
Excess Mileage Charge
If you go over the contracted mileage of the agreement, the lender will charge you an excess mileage charge. This will be detailed at the beginning of the process and will feature in your vehicle order form and contract documents. It can vary from a few pence per mile to pounds in some circumstances. The amount depends usually on the vehicle in question (it’s linked to depreciation) and the lender too. If you have a Lender Maintained lease the excess mileage charge cost will be more than a customer maintained lease.
Fair Wear & Tear Standard
Once you have booked your vehicle collection with your lender (or FVL) they will come and inspect your vehicle for damage and then take it away. Each lender has its own fair wear and tear standard for assessing vehicle condition upon their return. Most follow the BVRLA’s guidelines and most have a guide that can be requested before return. You can contact your lender direct, e-mail your account manager or our customer services ([email protected]) for this.
Most lenders are not expecting a brand new car back, as obviously it will have been used, but the guides help explain what is acceptable and what is not.
First Registration Fee
A government levy (currently £55) to cover the costs of registering new vehicles. With car leasing this is something that you don’t need to worry about.
Some lenders will let you formally extend your contract beyond the original contracted term. This is usually for a 6 month or 12 month term and the mileage will be contracted again also. The rental prices rarely stay the same, but it depends a lot of the vehicle lender. Some lenders don’t allow formal extensions and require the vehicle back as agreed. FVL can often request this for you.
Also called the lender or finance company. This company provides the contract that enables your lease.
A vehicle with two sources of power. Modern hybrids are usually a mix of a petrol engine and an electric motor, but there can be different variations. The first commercially available hybrid was the Toyota Prius released back in 1997. In the UK there were almost 50’000 new hybrid/electric cars registered in 2017. See also Electric Vehicle
Some lenders can offer an informal extension beyond the lease end. You can contact our customer services team or your account manager for more information. Please note that if in an informal extension the lender can request to have the vehicle returned on short notice.
This is your first instalment of your car lease. Generally, it generally varies from 1x up to 12x whatever your monthly rental is.
For example if your monthly rental was £300 and the contract profile is 6+35, your initial rental would be 6x £300 = £1'800. This would then be followed by 35 monthly rentals of £300.
Generally, the initial rental can be adjusted to suit you.
The Initial Rental is usually taken from your account 5 to 10 working days after delivery of the car. This can vary slightly depending on the lender used.
You won’t receive your initial rental back, it’s not a deposit.
A contract for a hire of an asset from one party to another, usually in return for periodic payment.
All of our lenders offer lender maintained agreements. These include routine servicing, repairs, replacement parts, tyres, batteries and exhausts. Sometimes they can include breakdown recovery and puncture repair (ask your account manager for details). Lender maintained agreements must be taken out before delivery of your vehicle. Also, the funder is not obliged to make repairs that arise from accidental, deliberate or negligent damage to the vehicle.
See also Customer Maintained and Lender Maintained
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. Generally speaking, the more expensive the car is, the more the lease cost. This is because the car is likely to lose more for the lender funding the contract. However, in certain circumstances a better standard specification on a car can improve the depreciation meaning the lease cost will become cheaper from the better specification.
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Usually for business contracts. Pooled Mileage terms are negotiated in the master agreement between the funder and customers who contract several vehicles.
Some lenders may offer a no obligation purchase price for the vehicle you’re hiring. If you ask for this whilst still in a live contract this will come with an Early Termination Figure also. Some lenders don’t offer a purchase price at all.
In certain business circumstance if a vehicle is not used for any personal purposes, it will qualify for 100% VAT Relief.
Any agreement covered under the consumer credit act. This usually applies to private individuals, sole trader and small partnerships.
Some car lenders funder offer a car to use while their own is off the road is they select the Relief Vehicle option with their maintenance element.
RV Residual Value
An estimate of what the vehicle will be worth at the end of the contract. With contract hire you don’t have to worry about this.
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.
Also known as Maintenance Rental. The element of rental that covers the vehicle's maintenance, relief vehicle (if selected) and breakdown services.
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.
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You can structure your profile to pay more upfront and have a period at the end of the contract where you don’t pay anything. Or in other words the rental free period at the end of a contract that is facilitated by the advanced payments at the start of the contract. This is called a terminal pause.
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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.