APR
APR stands for annual percentage rate. It is a calculation that allows consumers to benchmark the cost of borrowing. In general the lower the APR the better, although there are factors like whether the APR is variable or not to consider and whether you are comparing like for like. This means if you are comparing a remortgage APR with a Hire Purchase APR you do not get a true comparison as they are different types of loans.
APR takes into account the amount of interest you pay and any other fees charged by the provider such as arrangement fees for setting up the loan. It also takes into consideration when and how often interest and charges must be paid.
Balloon Payment
This is the final end payment, usually on a lease purchase or Personal Contract Purchase. It is used to get lower monthly payments as you are not paying off all the value of the car or van. The value is set based on the mileage per annum you choose.
Best Price First Time
This is our policy, we will do as we say, when we quote you a price you know that we are giving you our best offer. We know how valuable time is, and we do not want to waste yours or ours by quoting you a price then spending days haggling for a deal. You get the deal you deserve up front. Simple.
BIK
Benefit in kind is the term used by the Inland Revenue to assess the tax liability you have on a company benefit such as car or fuel allowance. If a company car is provided by an employer the employee is required to pay tax on the value of the car. From April 2002 this is calculated using the P11D value of the vehicle, the CO2 rating of the vehicle and the tax band of the employee (22% or 40%).
CO2
This is the emission rating of a vehicle expressed as grammes per km. In general the lower the emissions the more environmentally friendly the car is and therefore the lower the tax liability to the driver.
Depreciation
This is the amount of value your vehicle loses and is affected by mileage/age/condition.
Disallowable/Allowable VAT
If a vehicle is funded using Contract Hire or A Finance Lease and is used for personal use, the company can only claim back half the VAT on the rental payment. The portion of VAT you can't claim back is the disallowable VAT. All the VAT can be claimed back on the maintenance of the vehicle.
Early Termination
This is when you cancel a finance agreement before it is due. Contract Hire agreements are for a fixed term and incur heavy charges for cancellation. Hire purchase, personal contract purchase and lease purchase are much more flexible and easier to settle.
Effective rental
This is the actual cost of a rental which takes into consideration the disallowable VAT element of a Contract Hire or Finance Lease agreement. Ie on a rental of £100 plus VAT ie £117.50 total inc VAT you could reclaim half the VAT leaving the effective rental at £108.75.
Excess mileage
Certain finance agreements have an excess mileage charge. This is expressed as PPM (Pence Per Mile) and is charged when your vehicle exceeds the agreed mileage. This can be pooled when multiple agreements are taken out. For example, 2000 miles over at the end of the agreement at 10p per mile = £200.00 excess mileage charge for you to pay.
Final Payment (see balloon payment)
GAP
GAP Insurance is a policy that can be taken out with a new car. If your vehicle is written off for any reason, the value that your insurance company places on it will be considerably less than its actual retail value - and may be considerably less than the actual amount you still owe on your loan. This policy will cover the GAP between the two amounts, so you can start again from an even keel. If you owe £10000 on your finance agreement and the car is only worth £5000 you would normally pay the difference to the finance company before you can get another car. With GAP Insurance the £5000 difference would be paid for you.
Guaranteed Minimum Final Value
This is an agreed value that is found at the end certain finance agreements, typically personal contract purchase agreements. It means that you do not have to worry about the residual value in the future. The figure is agreed taking into consideration the length of agreement and the quoted total mileage.
Imported Vehicles (Parallel /Grey)
Parallel imports are vehicles that have been imported to the UK from Europe to the UK Specification or similar, Grey imports are none UK models, often imported from Japan etc. The warranty and final specifications of these cars will be different to a UK model and the residual values will be less. (please note, we do not sell this type of vehicle)
Initial Payment / Rental
This is the first payment you make on an agreement before the car is delivered, like a deposit.
OTR
On The Road price, this is the final invoice value of the vehicle, including road tax and delivery to the dealer. Contract hire agreements do not have an on the road price as you are only in effect renting the car from the owner (the finance company)
Off Balance Sheet
If a vehicle is funded on Contract hire for example, it does not show as an asset on the company balance sheet. It shows as a cost in the profit and loss account, therefore offering a tax saving in most circumstances. Please seek professional advice on this subject from an accountant.
P11D Value
As a company car driver you are responsible for paying income tax on your benefit. The is the amount that that the Inland Revenue use to work out your taxable benefit. The value is calculated by adding the list price and any extras (both dealer fitted and factory fitted) together but excludes the Road Fund License and First Registration Fee (£25.00).
PPM
Pence per mile. If you have an agreed mileage amount on your contract, any excess will be charged by the mile.
Pooled Mileage Agreement
As a business running a large fleet you may wish to group or Pool the mileage of your cars. This helps keep the over all running costs down, for example one driver may do 10,000 miles under the agreed amount, another may do 10,000 miles over. If pre-arranged with the finance company you could stop any further charges by netting one of against the other.
Terminal Pause (Terminal Rental)
This refers to a payment profile for your contract or agreement such as 3+33 or 3+21. Basically, the two amounts add up to the period of the agreement, and because you pay two extra payments up front, you have a two month payment free period at the end. This allows you to allocate funds for your next 3 advance payments when you change your car.
Reduced Spread (Spread Rental)
This is how most contract hire agreements are marketed, it is a way of keeping the monthly payment down to a minimum. For example a three year Reduced Spread would be shown as a 3+35, making a total of 38 payments.
Residual Value
This is the amount a vehicle is worth at a pre-determined time, for example at the end of a contract or finance agreement.
RFL
This stands for Road Fund Licence, or road tax as it is commonly know as.
VAT Qualifying Vehicle
If for example a vehicle is purchased by a contract hire and leasing company for the sole purpose of renting it out to a customer, the vehicle is classified as a VAT qualifying vehicle. The purchaser of the vehicle claims the VAT back and when they sell it at the end of its life with them, it is value is plus VAT. This is common on six month old cars that are being re-marketed on contract hire.
