We want to make things simple for you here at Lease Beast to find your next new car. If you are new to leasing the terminology can be daunting. We have compiled a list of commonly used jargon to help you understand leasing:
PCH (Personal Contract Hire) – Leases are also often referred to as PCH
Contract Length – The period of time the agreement with the finance company lasts
Finance Company – The entity who provide the funding for your car and whom you lease the car from. This could be a manufacturer such as VW Financial Services or perhaps a bank
Initial Rental – The amount of money paid upfront, either expressed in £ (i.e. £2400 is quite common) or a number of monthly payments up front (often 1, 3, 6 or 9 months). Not to be confused with a deposit, the Initial Rental is not returned to you at the end of the agreement and should, therefore, be factored into the total cost of the agreement
Payment Profile – A way of expressing the cost of a lease when the initial rental is based on a number of months up front. An example might be 3+23 or 6+35 which means 3 payments up front followed by 23 monthly payments or 6 payments up front followed by 35 monthly payments
Administration Fees – The broker might charge a fee for their part in introducing you and facilitating the necessary paperwork with the Finance Company
Mileage Allowance – An agreed number of miles per annum that you can use the car for before an excess mileage charge is applied. Common mileage allowances are 5000, 8000 or 10000 miles per year. Typically the mileage allowance can be increased but the monthly payment increases. This is typically charged per mile (i.e. 6p + VAT per mile)
Early Termination – A fee (think penalty) that needs to be paid to the Finance Company should you wish to terminate the finance agreement earlier than initially agreed
Broker – A broker acts as a middleman between the consumer and the finance company. The broker typically markets the leases available or might agree to lease a bulk order of cars for a bulk discount which can be passed on to the consumer. A broker typically charges a fee or is incentivised by the Finance Company.
Depreciation – The value a car loses over the course of it’s life. Many factors affect this such as supply/demand, press scandals (VW dieselgate!), running costs, mileage etc. The aim for leasing is to beat the cost of depreciation compared to when buying outright
Maintance agreement – An optional extra which is inclusive of servicing costs and/or tyres, brakes etc
Gap Insurance – A specific insurance product in addition to a typical car insurance product for new cars. This is an optional policy but ensurers the consumer is not out of pocket should their brand new car be written off and the market value payout the insurance company provides does not cover the outstanding finance.
FCA (Financial Conduct Authority) – The FCA overseas financial agreements and ensure consumers are protected. Any UK Finance Company will be overseen and have to follow FCA standards whereas the consumer is protected should that Finance Company have financial difficulties or cease trading.
End of lease inspection – At the end of the lease the car is inspected often by an independent 3rd party who assesses the condition of the car and ensures the manufacturer’s maintenance schedule has been followed
BVRLA (British Vehicle and Leasing Association) – The BVRLA are an independent trade body who provide services such as a code of conduct for leasing companies to follow. These codes of conducts set out standards for assessing fair wear and tear during the End of Lease Inspection
A factory order – When choosing to lease it’s very common for the order to be passed to the factory and the car is built to order with any optional extras or paint colour you have agreed upon. This typically takes many weeks (we have heard of people waiting up to a year!) but offers the ultimate flexability and customisation.
An In Stock Order – Some Brokers or Finance Companies may have cars in stock ready to go which eliminates the need to wait for the car to be built. The downside is that the specification is not able to be changed and you may have to choose from what’s available with less desirable options and colours.
Business Lease – Only available to businesses or to self employed individuals with a history of accounts
Personal Leasing – Individuals or the Joe Public who lease cars themselves. VAT is charged on all personal leases