We know that if you’re new to leasing then some of the words used can be a little confusing. Here at Xcite Car Leasing we try to avoid as much of the jargon as we can but there are some terms that you just can’t substitute. And whilst terminology like payment profile and GAP insurance might be par for the course for us, we know that our customers might not know them instantly. Which is why we’ve put together this article to help you understand all of the words and phrases that are specific to car leasing. In this article we’ll take the leasing terms and breakdown what it means for you, a little like a glossary (LINK /glossary/ ) but only for those key terms you’ll run into when looking at a car lease.
Key Car Leasing Terms
Leasing Broker – A leasing broker is a specialist company, like us, who work with dealers, manufacturers and funders in order to get the best lease agreements for their customers.
ATO (Authority to Order) – The ATO is one of the documents that you’ll sign when taking out a lease agreement through a broker. It confirms that they are authorised to order the vehicle on your behalf.
Initial Rental – This is the amount of your first payment. Some companies might call this a deposit but we avoid that phrase as you don’t get the money back.
An initial rental payment can be the same amount as your regular monthly payments or you may choose to pay more upfront to reduce the amount you pay in the following monthly payments.
Something to be aware of with an initial rental is that this will usually be taken within two weeks of delivery and that payment date may fall outside of your standard monthly payment scheduled date.
Payment Profile – Is a phrase used to describe the make up of your initial rental and following monthly payments. If you look at the example below this is shown as 9 + 35 this means that the initial rental is equivalent to nine monthly payments, and that there are 35 regular monthly payments following this initial rental, making it a 36 month (three year) agreement.
Contract Length – This is fairly self-explanatory in that it is how long your lease agreement will last. This may be shown in years or months and will typically be between two and four years, 24 and 48 months.
Annual Mileage – Again this is a pretty straightforward term, it’s the amount of miles you agree to as an annual limit. Whilst this is agreed as an annual allowance the funder will not actually check the mileage until the vehicle is returned to them, so you do not need to worry if you go a little over one year and a little under the next.
Something to note is that if you do exceed the annual mileage then there will be a charge for this.
Overmiles Charge – Also known as excess mileage, the overmiles charge is the amount you will be charged per mile you exceed your mileage allowance. This will usually be shown, and charged, as a pence per mile figure.
One thing to be mindful of is that if you have a maintenance package then there will be two overmiles charges, one for the vehicle lease and one for the maintenance agreement.
Residual Value – The residual value is the expected value of the vehicle at the end of your lease agreement. This will not really matter to you other than to be aware it is taken into consideration by the funder when they calculate the cost of the lease,
Contract Hire – Contract hire is the official term for leasing. You’ll see contract hire (CH) used for business leasing and personal contract hire (PCH) for personal leasing as there are a few differences between the two, simply because of the type of customer.
Contract Purchase – This isn’t technically a leasing term but you may see it as a similar product offered which is why we’ve included it. Unlike a contract hire you are agreeing to purchasing the vehicle, and there will typically be a balloon payment at the end of the contract or you make arrangements for it to be sold.
We do not currently offer contract purchase options at Xcite Car Leasing but you may see this elsewhere when looking for a new car which is why we mentioned it.
Personal Lease – A personal lease is one taken out by an individual for their personal vehicle.
Business Lease – A business lease is a lease taken on by a company. This can be a sole trader, partnership or limited company.
Cooling Off Period – The cooling off period is a 14 day period from when the finance contracts are approved where if you change your mind you can cancel the contract without penalty. In leasing this only applies to personal agreements, there is no cooling off period on a business lease.
One thing to be aware of is that we will not arrange delivery of a new lease car during the cooling off period. This is to avoid added complexities for all parties, including you.
Maintenance Package – A maintenance package, also known as a maintenance agreement or simply maintenance is an additional product you might choose to add to your lease. The specifics of what is and isn’t included will vary slightly between funders but generally it will cover you for any expected maintenance, servicing, MOTs and tyres. For more information on what a package includes we have a dedicated maintenance guide or you can ask one of our Leasing Consultants when you are discussing a quote.
Factory Order – This is the term used to describe cars that need to be ordered from the factory rather than a vehicle that is already built or in stock in the UK. These cars will typically take longer to be delivered to you as they will be in a build queue, need to be built and shipped to the UK.
Stock Vehicle – At Xcite Car Leasing we use stock vehicle to describe a car that is at the dealership, or due to arrive imminently. We’ll use it to describe vehicles that are nearly in stock and we expect them to be ready to deliver by the time the paperwork and cooling off period are complete.
Delivery Lead Time – This is the expected length of time it will take for a car to be delivered to you. It will only be an estimated time frame until the car is in stock at the dealership.
Early Termination – An early termination is when you end the lease agreement before the contract is due to end. There will usually be a fee for ending the agreement prematurely and this is known as an early termination charge.
GAP Insurance – This is a specialist insurance product designed for leasing and similar finance products. It will cover you if the car is written off or stolen and unrecoverable and there is a discrepancy between the remainder of your lease payments and what your insurance provider value the car at. For a more detailed breakdown of GAP insurance and why you might want it take a look at our GAP guide.
POA (Price on Application) – You might see this term used when you add options to a vehicle on our site. This simply means that there’s a few more calculations we need to do to get the exact price for a lease including the additional features and will do this once you get in touch with us. You can do this by sending an enquiry or placing an order on a particular deal or speaking to the team on 0330 221 0000.
BVRLA – the BVRLA or the British Vehicle Rental and Leasing Association to give its full name, is the governing body that oversees the rental and leasing sector.
Electric Leasing Terms
There are a few terms that you might encounter that are used in the electric car leasing sector. These relate to both the car and the types of lease agreement. We’ve looked at some of the terms below but if you’d like to learn more about electric cars, leasing one or see our deals then why not take a look at our electric leasing page or one of our helpful electric car guides.
Salary Sacrifice – Whilst salary sacrifice schemes can be used for petrol and diesel vehicles they’re the most cost effective, for businesses and drivers, when they’re used for electric vehicles.
BIK (Benefit in Kind) – This is the tax you’ll pay on a company car, if you lease through a workplace scheme. For a more detailed look at BIK then check out our company car guide or company car tax calculator.
Hybrid – A hybrid is a car that has an electric system and an internal combustion engine (ICE). They’re often considered a stepping stone as they offer drivers a bit of what they’re used to and some of the benefits of an electric vehicle (EV).
PHEV (Plug-In Hybrid) – A PHEV is a hybrid that needs to be plugged in to recharge the electric system. These will offer drivers longer electric powered ranges as they can have larger batteries.
Mild Hybrid – Many cars will offer drivers some mild hybrid technology. This is where they do not have an electric powered range but instead use some systems to assist the ICE such as regenerative braking or additional power when accelerating.
Range – The range is essentially the same as mileage in a petrol or diesel car. It’s how far your car is expected to travel on its current fuel levels.
One thing to be mindful of with range is that there are a number of factors that affect an EV’s range that means you might not achieve the range shown, these include the weather, road type and even how you drive.
Range Anxiety – This is the term used to describe the worry that some drivers feel about relying on an electric system to power their car and whether their mileage range is enough.
Commando – This is a type of charging connection used on EV chargers. You are likely to see it in the vehicle description.
CHAdeMO – Again this is another type of charging connection you will find on some EV models.
CCS – This is a third type of charging connection that you might encounter.
Enjoyed this article? Read more of our latest blogs below:
- UK Potholes Revealed
- Five Essentials for Winter Trips
- Your Leasing Journey with Xcite Car Leasing Explained
- The Best Cars of 2023
Want to know more about car leasing?
For all our latest news and blogs click HERE.
Looking for the next best car leasing deal? Check out our Top Leasing Deals.
Or do you need to know more about leasing? Check out our Guide Pages.