Glossary Of Terms

Glossary of Leasing Terms

Acceptance Fee

This fee covers the finance provider’s administration costs for the agreement.   

Annual Percentage Rate (APR)

Annual Percentage Rate (APR) is used so that different contracts can easily be compared.  It takes into account not just the interest on the loan but also any other charges which apply.


Arrears refers to money that is owed and should have been paid at an earlier date.  It often refers to money that is paid on a regular basis such as rent or regular finance payments.

Balloon Payment (Final Payment / Guaranteed Minimum Future Value (GMFV))

A balloon payment (also known as a final payment or guaranteed minimum future value (GMFV)) is a sum of money owed at the end of the finance agreement once all monthly payments have been made.  Balloon payments are used to help lower monthly leasing payments, and give clients the option of owning the vehicle at the end of the agreement.

Benefit in Kind (BIK) Tax

Benefit in Kind (BIK) is a tax deduction payable by  company car drivers. Every car has a BIK banding.  It is based on P11D value and CO2 emissions.  To calculate the BIK tax, multiply the P11D value by the BIK percentage banding, then multiply that figure by your tax band - i.e. 20% or 40%.  Divide this figure by 12 to obtain the monthly amount of tax paid.  

Please see example below for illustrative purposes only.  Please contact your Account Manager if you would like help calculating company car tax on your vehicle.

EXAMPLE OF COMPANY CAR TAX – for illustrative purposes only.

Example: BMW 318D Sport 4 Door

CO2 Emissions of Vehicle


P111D Value of Vehicle


BIK banding

20% of £29,720 = £5944

Taxable amount at 20% income tax

£5944 @ 20% = £1188.80 p.a. or £99.07 per month

Taxable amount at 40% income tax

£5944 @ 40% = £2377.60 p.a. or £198.13 per month


Breakdown recovery / Roadside Assistance

Breakdown recovery or roadside assistance is often included for all or part of your leasing agreement, so it is worth checking the terms of this on your lease.  In the event of a breakdown, a mobile unit will respond to you.  It will either attempt to fix your vehicle at the roadside, or alternatively, organise your car to be towed to the nearest garage for repair.  All policies vary so please check your contract for exact details.  

Business Leasing

There are a variety of leasing financial products available for businesses depending on individual circumstances.  Business leasing is not available for private individuals.

Car Leasing

Car leasing is the long term rental of a car.  You pay a fixed monthly fee and drive an agreed mileage for the term of the lease, then hand the car back at the end of the contract.  You never own the car.  

Consumer Credit Directive (CCD)

The Consumer Credit Directive (CCD) are EU regulations designed to increase consumer protection across Europe, including the UK.

Credit Score

A credit score is an individual’s score on their credit worthiness.  It helps financial providers check that you can afford the repayments associated with financial products.  You will need a “Good” or “Excellent” credit score to be accepted for a van or car lease.  You can normally check your credit score by contacting the relevant credit reference agencies.

Credit reference agencies such as Equifax, Experian and Call Credit amongst others, can provide you with a report of your credit history and help explain your credit score.

You can also access free and independent financial advice from Citizens Advice and The Money Advice Service

Deposit (Initial Deposit, Initial Payment)

Better known as an initial payment, this is a sum of money which is required at the start of the leasing contract.  Typically, this would be at least the equivalent of three monthly payments.  This initial payment forms part of the overall cost of the lease and is not returned to you.


The depreciation of the vehicle is the change in value of the car over time.  Often with leasing contracts, the cost of the lease is related to the amount of depreciation in the car over the term of the lease.  

Early Termination Fee

An early termination fee is a charge payable if you want to end your leasing contract before the agreed time.  

End Of Lease Purchase Price

Depending on the type of agreement you have taken out, there may be an opportunity to purchase the vehicle at the end of the contract. The price of the vehicle is called the end of lease purchase price, which takes into account the current value of the car,  depreciation and any other charges.


Equity within a lease car means that, at the start of the contract, you agree what the value of the vehicle will be at the end of the lease, but at the end of the agreement, the vehicle is actually worth more than that agreed value.  This could be, for example, because you have driven a lot less miles than you anticipated.  If you owe the financial provider less money than the car is worth, there is equity in the vehicle.  

Excess Mileage Charge

Part of your lease contract is based on how many miles per year you drive.  If you drive more miles than  agreed, you will have to pay an excess mileage charge.  This is usually costed on a pence per mile basis and you will be informed of what this is when you take out your leasing contract.

Excess Wear and Tear Charges

The leasing company will give you their “Fair Wear and Tear Guide”.  If you hand back your vehicle at the end of the lease and the car does not meet its minimum standards as set out in the guide,  they will charge you an “Excess Wear and Tear Charge” to cover the costs to repair the vehicle, or because the vehicle is now worth less than originally expected.  

Fixed Interest Rates

A fixed interest rate means that the rate will not change during the term of your lease, so your monthly payments will remain the same.

Fuel Economy

This is the efficiency of a particular vehicle based on the distance it travels and the amount of fuel it uses.  Fuel economy is measured in miles per gallon (mpg).  The higher the mpg, the greater the fuel economy, so the cheaper it is to run the vehicle.  

Gap Insurance

Gap stands for Guaranteed Asset Protection (GAP).  It is an insurance product that helps cover any shortfall should your vehicle be written off or stolen, causing your insurance company to value the car at a lesser amount than you owe to the finance provider.  

Guaranteed Minimum Future Value (GMFV)

Guaranteed Minimum Future Value (GMVF) is the minimum value that the vehicle is said to be worth at the end of an agreement.  It is also known as a final payment or balloon payment as it is the same sum of money owed at the end of the finance agreement once all monthly payments have been made.  

Also see: Balloon payment


A guarantor is usually a family member or a friend who is responsible for making your payments if you fall into arrears.  Having a guarantor can help some people be accepted onto a leasing contract.


On certain types of lease, once you have paid half of the agreement, you are entitled to terminate the contract and return the car.  However, you may still have to pay early termination charges.  

Hire Purchase

Hire purchase means that you pay monthly instalments for a set term and the vehicle is yours at the end of the contract.  It is therefore an alternative to car leasing.  The car will remain the property of the hire purchase company until the final payment is made.  The monthly payments can be much larger than leasing a car as you will own the car at the end of the contract.  

Invoice Price

The invoice price of a vehicle is often used for insurance claims.  It excludes any costs which are legally required to put the car on the road.  

Lease Term

Lease term refers to the length of your leasing contract.  Typically, these are usually 24, 36 or 48 months.  

Manufacturer Warranty

Each car manufacturer provides a warranty for all brand new vehicles, which also applies to lease vehicles.  The length of the warranty depends on the vehicle manufacturer.

Mileage Allowance

A mileage allowance is a sum of money paid to individuals for the cost of using their own vehicle for a work-related journey on behalf of the company for which they work.  It is usually calculated on a ‘pence per mile’ basis.

P11D Value

The P11D value of a car is used by the Inland Revenue to calculate company car tax. This is the list price of the vehicle minus the £55 first registration fee, but the value does include the cost of any optional extras added to the vehicle which cost more than £100.

Part exchange

Part exchange occurs when you  trade in your current vehicle as part payment for a new vehicle.  

Peppercorn Rental

This is a legal term used as a metaphor to signify a very small nominal payment which is required to satisfy a legal contract.  

Personal Leasing

There are a variety of personal leasing options available for private individuals.  Personal leasing products are not available for registered businesses.  

Registered Keeper

The registered keeper of the vehicle is the person who is responsible for taxing the vehicle.  The registered keeper may not be the person who legally owns the vehicle.  

Residual Value (RV)

This is the minimum value of the vehicle at the end of the leasing contract term.  An element of the cost of the lease is usually based on the difference between the value of the brand new vehicle and what the leasing company believes the vehicle will be worth at the end of the lease.  

The residual value will depend on the make and model of the car, the condition of the car, and how many miles per year the car is driven.

Sale of Goods Act

When buying a new or used car, a car dealer must comply with the Sale of Goods Act which states that the vehicle must be of satisfactory quality, be fit for purpose and be as described.  


A settlement payment refers to the very final payment due on a leasing contract, meaning all outstanding costs have been paid in full.  


Before any client can be offered a car leasing contract, the financial provider will require their finance application to be underwritten to assess their eligibility for credit.  This process can take from 24 hours up to 7 working days, depending on the application.  A new vehicle cannot be ordered until the contract has been underwritten and the finance terms accepted.  

V5C Document

The V5C or vehicle registration document registers your vehicle with the Driver and Vehicle Licensing Agency (DVLA). It contains information on the date the vehicle was first registered, its manufacturer and the colour and engine size. It also shows who the vehicle’s registered keeper is. 

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Synergy Automotive Ltd trading as Synergy Car Leasing is authorised and regulated by the Financial Conduct Authority (FCA) FRN 660618. Synergy Automotive Ltd trading as Synergy Car Leasing is a credit broker and not a lender.