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Leasing Jargon Explained at last

                                                                                    Leasing Jargon Explained

Balloon Payment:
The final rental on a Finance Lease Agreement. This is the value the vehicle must realise when it is sold at the end of the contract. If the vehicle proceeds to not cover the Balloon Payment then the liability is with the Hirer.

Why Balloon Payment or Rental:
Because if you adjust the rentals or the initial payment then the final payment will adjust accordingly, so if you squeeze a balloon in the middle then the ends go up!

Initial Payment:
The first instalment on your lease, paid in advance of delivery. It is not a deposit and is non- refundable.

Profile:
The most popular contract profile is 3 + 35, so an initial payment of 3 times the monthly rental followed by 35 regular monthly payments. The initial can be increased to 6 or 9 times the monthly rental and the rentals will be lower to reflect the increased initial and a small saving in interest.You can also request a profile such as 3 + 33 so that you make the equivalent of 36 payments over 3 years, the monthly rentals will be slightly higher than a 3 + 35 profile but you will enjoy a terminal pause at the end of the contract.

Terminal Pause:
If you select a profile such as 3 + 21, 3 + 33 or 3 + 45 then the last 2 months of the contract will have no rental and this is called the terminal pause. You have contracted the vehicle for 36 months but only pay rentals in 34. You could use the terminal pause period to assign funds for the initial on the next vehicle.

Depreciation:
The amount the vehicle drops in value from purchase to selling price. Depreciation has the largest impact on rentals, the more the vehicle depreciates the higher the rental.

Residual Value:
The predicated value of the vehicle when sold at the end of the contract based on age and mileage and assuming good condition.

PPM:
Pence per mile, you contract the vehicle on a stipulated mileage, if you exceed the mileage then you will incur excess mileage based on the pence per mile rate quoted in the agreement.

Re-Contracting:
If you are aware that your vehicle is tracking over mileage it is more economical to re-contract the vehicle for the balance of the contract term at a higher mileage. Generally, this works out less expensive than paying a large excess mileage charge at the end of the contract and you are spreading the cost, but please check administration fees which may be applied.

Pooled Mileage:
If you are operating several vehicles then check if you are entitled to pooled mileage, where the vehicles mileages are aggregated so the over mileage id offset by any under mileage.

Unfair Wear and Tear:
Charges which may be incurred by the Hirer at the end of the contract due to the condition of the vehicle when returned. Check the leasing company’s policy on this to avoid end of contract costs, most leasing companies adopt the

BVRLA guidelines:
BVRLA guidelinesThe British Vehicle Rental and Leasing Association has established guidelines for the industry which include guides on the condition of vehicles dependant on age and mileage.

Off Balance Sheet:
Currently one of the advantages of Contract Hire, future rentals are not counted as assets or liabilities on the balance sheet possibly improving future borrowings. This is currently due to change in January 2019.

P11D:
The value of the car for benefit in kind taxation purposes. The full list price of the vehicle including, additional extras, delivery, number plates and VAT. It excludes Road Fund, First Registration Fee and Discounts.

BIK:
Benefit in Kind is the taxable benefit levied by HMRC for having a company car or a free fuel allowance. Dependant on the P11d and the Co2 values of the vehicle.

Co2:
This is the emission rating of a vehicle expressed as grams per km. The lower the emissions the more environmentally friendly the car is and therefore the lower the tax liability to the driver.

Unsure of anything else? Shoot us an email on Leasing@gates.co.uk

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Posted on 30th March 2017 at 4:26 PM

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