Thinking of leasing a car, but feel a little overwhelmed by some of the jargon and abbreviations? Balloon payment anyone? 🤔 Let us here at 360 Autoleasing help you with a list of some of the more commonly used terms that you are likely to come across!
PCH – Personal Contract Hire
This is also known as a personal car lease, which is an arrangement with fixed, monthly payments, but there is no option to own the car outright.
BCH – Business Contract Hire
A type of leasing deal that favours VAT registered companies by allowing VAT to be claimed back. A BCH can work out cheaper than a personal lease.
PCP – Personal Contract Purchase
This differs from PCH because there is the option to buy the car at the end of your contract. With this, there is also the option to re-finance the remaining money owed or hand the vehicle back.
Most lease deals include an ‘administration fee’. It may be called a different name, such as ‘document fee’ - but chances are if you find a deal without one you will be paying more for your fixed monthly instalments.
Most car finance and leasing agreements will include an agreed mileage allowance. This, along with the cost per mile will be agreed before the contract begins. If you exceed the set mileage, you will be subject to an excess mileage charge which will have to be paid at the end of your leasing.
Fair Wear and Tear
Your chosen leasing company will expect the car to be handed back in good condition. However, it is known that there will be some wear and tear is inevitable. At the commencement of your contract you should be given a guide set out by the BVRLA (see below) as to what constitutes fair wear and tear. When handing your car back at the end of the contract it will undergo an inspection, if damage to the car goes beyond fair wear and tear, you will be subject to charges.
The BVRLA are the British Vehicle Rental and Leasing Association, the leading body for all things leasing and rental. They set the industry standard for wear and tear and also offer mediation should you dispute for wear and tear charges.
Not to be confused with initial payment (see below). A deposit is a sum of money you may need to pay before purchasing a car. Though not always necessary, a deposit can mean lower monthly payments. The higher your deposit, the lower your instalments.
Initial Rental Payment
A non-refundable initial rental payment that is sometimes required for a lease. Usually a multiple of the monthly rental payments followed by your remaining instalments. For example, a 6 +35 deal would require an initial rental payment equal to 6 months’ rentals, followed by a further 35 monthly rentals.
A balloon payment is the amount of money owed to the finance company once a leasing contract is finished and all the monthly payments have been made. This enables the borrower to make lesser payments over the duration of the contract by paying a lump sum at the end of the agreement instead.
When leasing a car, VAT is payable on the rentals. If a lease is taken on a personal basis, the rental figures will usually be shown include VAT. If your vehicle is on a business lease, rentals will usually be shown excluding VAT. As a VAT registered business the VAT element, or a proportion of, is reclaimable at the current rate. VAT currently stands at 20%.
So, if you are thinking of leasing a car, we hope our jargon buster has made things a little clearer for you! This list is by no means definitive – there are other phrases and abbreviations out there, but we have to pick the most useful and commonly encountered. If there is something this list hasn’t covered, or you have any questions at all, please don’t hesitate in getting in touch! We are here to help. You can call us on 01509 767025 or email us at firstname.lastname@example.org
16th of July 2019