Direct Vehicle Leasing

B.I.K Benefit in Kind:
This is the company car tax. If an employee has a vehicle given to them by their employer they have to pay tax from their personal salary. As of 6th April 2002 it is based on P11D value, the amount of Co2 emissions and how much they get taxed from their personal salary, (23% or 40%).

Base rate:
The interest rate that finance houses use to calculate interest on loans. When general interest rates change, the base rate normally changes too.

Car downtime:
When your car is off the road for servicing or repairs.

Car uptime:
When your car is on the road and you can use it.

Contract amendment:
If you change the type of finance deal, the time limit, or the mileage limit during the deal, this is called a contract amendment.

De-hire:
When your car has reached the end of the deal and is no longer on hire.

Depreciation:
The amount of value your car loses as it ages.

Early termination:
Cancelling the deal before it is due to end.

Effective rental:
Applies to Contract Hire/Finance Lease. This is the bottom line figure a company will pay on a monthly rental once they have claimed back their VAT. (That can be reclaimed)

Excess mileage:
When you exceed the mileage limit of your deal. You will be charged at a pre-agreed rate for every extra mile over the mileage limit (see “Pooling”)

Extension:
A formal agreement to extend the length of the deal.

Final payment:
The last payment of the deal. (See also “Balloon payment”.)

Delivery Charge:
All manufacturers charge one. It is classed as a charge for delivery from the factory to the dealership.

GAP insurance:
GAP stands for guaranteed asset protection. If your car is written off or stolen, your car insurance will pay out the car’s market value. That payout can fall short of the amount you still owe on the finance deal. GAP insurance covers that shortfall by paying out the difference.

Initial payment:
Sometimes called IP, this is a payment you make before the car is delivered.

List price:
Cost of the vehicle in the manufacturers price list. Usually shown on quotes including VAT. This does not include any extras, delivery, RFL, etc…

Minimum guaranteed future value:
Also known as MGFV and, sometimes, as guaranteed future residual value. It is the lowest amount that your car is guaranteed to be worth at the end of a contract purchase deal.

P11D Value/Tax list price:
This is the total value of the vehicle in the eyes of the taxman. This price should include any accessories, first registration fee, 12 months VED/RFL, delivery charges and VAT etc.

Parallel/Grey Imports:
Are vehicles not supplied by a U.K main dealer, they are imported from elsewhere. They may be identical specification, but under no circumstances (except) Bank of Scotland but check with DVL) will the finance companies purchase an imported vehicle. This applies to new and nearly new vehicles, so if you are unsure, ask.

Payment:
The amount payable on a purchase agreement (H.P, Lease Purchase, Contract Purchase). No VAT to add

Pooling:
A way of calculating excess mileage (see above) for a number of cars on the same fleet.

Rental:
The amount payable on a rental agreement (Contract Hire and Finance Lease). Always + VAT.

Residual Risk:
The risk that the vehicle will not meet its anticipated future disposal value.

Residual value:
The amount the car is worth at the end of the deal.

RFL – Road Fund Licence:
Road Tax

Sale and buyback:
When you own a car and sell it to a fleet provider, who then leases it back to you.

Secondary rental:
If you want to keep renting the car once the original deal is up, you arrange another deal. This is called a secondary rental.

Total OTR/On Road cost/Invoice Value:
Is the total price (inc. VAT) that the finance company will pay for the car including VAT & 12 months road fund licence. All vehicles new or used must be supplied with 12 months RFL.

Underwriting:
All companies wanting to proceed with acquiring a company vehicle will have to be underwritten in most circumstance even if they already have vehicles with them/us. The underwriters are looking to see if the company can pay the monthly amount and how reliable they will be at meeting this commitment. They view the risk as not only the monthly figure but also the total cost of the vehicle.

Uninsured recovery loss:
The recovery of costs no covered by your insurance.

VAT:
Value Added Tax

VAT Qualifying cars:
For a car to be used on Contract Hire or Finance Lease the car has to be VAT Qualifying. All brand new un-registered vehicles are VAT Qualifying. Not all used vehicles are VAT Qualifying; cars that have been owned by private individuals can never be VAT Qualifying. If you are sourcing a used vehicle for Contract Hire / Finance Lease always ask the supplier if it is VAT Qualifying. Good examples of VAT Qualifiers are ex daily rental vehicles; vehicles previously registered to a company or vehicles that have previously been registered to a Contract Hire / Finance Lease Company.

VED Vehicle Excise Duty (RFL Road Fund Licence):
All vehicles purchased on behalf of a finance company whether
new or nearly new (ex fleet) should include 12 months VED/RFL.