Glossary of Leasing, Contract Hire and Finance Terms

If you are not familiar with some of the terms and trade jargon you will read in the motoring press and on the Internet relating to car leasing, pcp’s, contract hire, finance leasing etc, we have included some brief definitions of the expressions you will see most commonly used.

If you have any queries as to the most suitable vehicle funding options we will be pleased to offer our recommendations, either telephone or contact us with your enquiries.

3 x 35, 6 x 35 etc

3 / 6 The number of initial payments. 23, 35, 47 The number of payments within the agreement


Total amount of a loan

Annual Percentage Rate or APR

The total interest payable on a loan


Payment due at the end of a Contract Purchase agreement which pays to buy the vehicle. Often clients return the vehicle and replace with new one

Car Allowance

Payment made by a company to an employee in lieu of a company car. Normally paid monthly through salary and is broadly equivalent to the leasing cost of the car

County Court Judgment or CCJ

County court order made against a borrower who has defaulted on payments

Contract Hire

Fixed period vehicle rental e.g 12 months, 24 months available to include vehicle maintenance etc. Payments include VAT

Contract Hire (Personal)

As Above, but for private individuals not VAT registered

Contract Purchase

Agreement to purchase the vehicle over a set period of time. Usually includes full maintenance (like Contract Hire). Often includes final balloon payment

Credit Score

Points system used by lenders in assessing a clients Credit Rating e.g Home Owner, Tenant, Electoral Role. Each point earned improves the Credit Score

Credit Search

A credit check carried out by a credit reference agency to check your past and current credit record e.g If you have CCJs, defults etc. Check Your Credit File


The amount of money you pay towards the vehicle agreement


The decreasing value of a vehicle over a period of time


The value of the vehicle less any outstanding finance


GAP or Guaranteed Asset Protection is insurance protecting the borrower in the event a vehicle be written off or stolen. The payment tops up whatever is paid by the Car Insurance Company sufficently to pay off all outstanding finance


Guaranteed Minimum Future Value of a vehicle


HPI refers to checks carried out to ensure that a vehicle has no outstanding finance prior to sale or transfer. Also reveals if the vehicle has been imported or may have been written off in an accident

Income Protection Insurance

Insurance often refered to as (ASU) Accident, Sickness, Unemployment. Also refered to as (PPI) Payment Protection Insurance. This type of cover is designed maintain vehicle payments in the event of an accident, sickness or unemployment


Insurance Premium Tax payable on all Insurance premiums


The person who has leased the vehicle


The lessor is the company leasing you the vehicle


Manufacturers Recommended Price


Pence per Mile


Road Fund Licence


Service Maintenance & Repair


Status, is associated with standard contract-hire terms. Non-status applies to new start companies, adverse credit and/or limited accounting information

With Maintenance

The part of a vehicle finance agreement which covers servicing, repairs and tyre replacement


The Whole Life Cost, costs including depreciation, servicing, fuel etc for running a vehicle for a defined period of time