Glossary

Balloon Payment
Means an amount deferred until the end of the lease, normally roughly equal to the residual value prediction. This reduces the monthly payments on the lease significantly. In some leases types the finance company guarantee to take the vehicle back for an amount equal to the balloon. Also called the final payment on some lease documentation. See Types of Finance for details of what types of lease have a guaranteed balloon.

BIK
Benefit in Kind. This is calculated on the vehicle's ‘List Price’ for tax purposes and includes VAT, the list price of any options including VAT and the manufacturer’s delivery charge on the day before the vehicle is registered. This figure is provided to the customer to assist them in their reporting to the tax office and is used to assess the amount of tax a driver will pay as a result of having a company car. Customers are advised to speak to their financial advisor/accountant if they have any queries.

Breakdown Recovery
A mobile repair and recovery service for instances when the vehicle will not start or has broken down either at home, on a road or motorway, or when travelling abroad in Europe. On most new cars breakdown cover is provided as part of the warranty package.

CCA
Consumer Credit Act. Enacted in 1974 to protect individuals, unincorporated companies (not limited) and partnerships where credit does not exceed £25,000.. (Referred to as a regulated agreement).

Cherished Plates
Same as personalised number plates. Customer can assign them onto finance vehicles, but most funders will charge an administration fee for doing this.

CO2
Abbreviation for Carbon Dioxide. The amount a car emits in g/km is used to calculate the how much company car tax and Road fund License it attracts.

Contract Hire
An ‘Off Balance Sheet’ funding method where a company hires a vehicle from for a specified period and makes regular payments. The leasing company retains ownership of the vehicle and is responsible for the associated risks. At the end of the contract period the vehicle is returned to the leasing company.

Contract Purchase
Generally an ‘On-Balance-Sheet’ funding method where a company hires a vehicle for a specified period and makes regular payments. The difference to Contract Hire is that the company/driver has the ability to purchase the car at the end of the contract for a predetermined amount (balloon figure) as long as the ‘Sales Agency Agreement’ has been completed.

Daily Rental
Short term rental of vehicles. Useful when a driver needs to make a one-way journey or only needs a vehicle for a short period of time.

Depreciation
The loss in value of an asset as it is used. This is measured as the difference between the original purchase price and how much it is sold for at the end of contract.

Finance Rental
The rental element, which covers the finance part of the rental only. For contract hire, it includes the Road Fund Licence.

First Registration Fee
Designed to cover the administrative costs associated with registration of the vehicle throughout its life. Currently set at £50.00 (no VAT is charged). The government levies this on all new vehicles.

Formal extension (Contract Hire only)
Also known as Secondary Period. When a customer wants to extend their contract by 3 months or more the finance company will raise a quote for the extension – but why not just get a new car!!

FSA
Financial Services Authority. This is the regulatory body for the financial services industry and ensures all companies conform to a<