LeaseCar UK Logo
Rated 4.9 out of 5 on Trustpilot

4.9 out of 5 on Trustpilot

Car Leasing Glossary and Key Terms

We don't just offer a number of car leasing deals at superb value, we also look to provide our customers with the very best customer service on the market. We do this through offering unrivalled assistance when it comes to choosing the vehicle that they want, and the deal which suits them. We've also made this handy page which looks at car leasing glossary and key terms, so you know everything there is to know about your lease when it comes to signing the contract.

We offer a wide range of affordable vehicle leasing services. They are:

  • Business contract hire
  • Personal contract hire
  • Business contract purchase
  • Finance lease
  • Lease purchase

Get in touch if you want to find out about Mercedes hire purchase or Toyota business contract hire for example. We're always on hand to run through the deals that we have, including the most intricate of details such as what balloon payments are, how depreciation works and of course running through the agreed monthly payments.

Before you speak to us, or even during negotiations, you should look to really understand everything that you possibly can about car leasing so that you're not unawares to what you're agreeing too. See this as your comprehensive resource to all the jargon and technical language which is used in car leasing, so that you're able to get the best deal.

You might not even choose to lease with us, you might have just stumbled across this page via an internet search. Even so, it's sure to iron out some key issues that it's best you really know about.

It's all in plain english, and we'll take our time to explain the finer details so that you can make an informed and intelligent decision about the car you want and the lease deal that you think is best for you.

Car Leasing in the UK

We know that there are hundreds of car leasing companies in the UK, so we thought, what can we do to stand out. And as a team, our decision was simple, just be the best. This means not only offering the best deals, but offering the very best service we can. This page is meant to give you an insight into all the complicated vocabulary which is involved in leasing. It's not really that confusing, but there might be a couple of terms that you're not sure about.

We've handily done this in alphabetical order so you can easily find the term you want. Read through the glossary and pick out the key terms that you need, you'll then be prepared before, during and after the lease contract. This means you'll know everything you need to know and you won't be left amiss as to what you've signed up for.

UK Car leasing glossary and key terms

Advance Rental

An initial payment of up to 50% of the total rental value, there is no upper payment limit on personal contract purchase agreements.

Balloon Payment

A balloon payment is the amount of money which is owed to the finance company once a leasing contract has finished, when all the monthly payments have already been made. This lets a borrower make payments of a lesser amount over time, instead paying a lump sum at the end of the agreement.

Blocked VAT

Limited companies and non-government customers can claim back 50% of the VAT on their finance rental and 100% of the VAT paid on their service agreement.

Blocked VAT only applies to cars where there is an element of private usage, it refers to the total rental payable after the VAT has been reclaimed.


The amount of C02 that a car emits affects the amount of company car tax and Road Fund Licence that it attracts.

CCA Consumer Credit Act 1974

The legal protection for individuals, unincorporated companies and partnerships. Regulated Credit Agreements must have a cooling off period where they can be cancelled.

Commercial Use

This is when a business leases a vehicle. This normally means that a number of different people will be using the vehicle, and its important that it shouldn't be used for personal use.

Contract Hire

An 'Off Balance Sheet' method where a company hires a vehicle for a specified period and makes regular payments. The dunder retains ownership and all of the associated risks.

Contract Purchase

An 'On Balance Sheet Method' which is similar to Contract Hire but where the customer can buy the vehicle come the end at the contract. The vehicle can be purchased for a pre-determined amount (balloon payment) or return the vehicle if they wish.

Delivery Note

A document signed when the customer takes delivery of a vehicle. The date normally signals the start of the agreement and payments then begin one month later.


This is the amount of value that a vehicle will lose over a certain period of time. The deprecation is the difference between the original price and how much it'll be worth after the lease is over.

Early Termination

When a customer decides that they want to end the agreement before it was originally arranged. The Leasing company is able to charge a fee which will cover themselves in this circumstance. It usually means that the vehicle needs to be returned and 50% of any outstanding payments have been completed.

Excess mileage charge

When you enter into a leasing contract, you'll be asked to set a mileage limit. If you then go over the mileage limit, you'll normally have the pay an excess mileage charge which can change in value depending on which leasing company you choose to go with.

Fair wear and tear guide

This is a BVRLA guide that clarifies the definition of fair wear and tear at the end of a lease. At LeaseCar, we adhere to this guide.

Hire purchase

Hire purchase is a type of asset financing which allows either a business or individual to use and control a vehicle during an agreed set of time. During this period, monthly payments will be made to cover the depreciation of the vehicle. At the end of the contract, the lessee can either decide to own the car outright or simply return it to the leasing company.

Lease term

This is the period of time in which you're able to use the vehicle, and the period of time that you will be paying on a monthly basis. A standard lease term will be either 24 or 36 months, although 12 or 48 months contracts can sometimes be arranged. It's also worth bearing in mind that the shorter a lease term is, the more expensive the monthly payments will be.


The lessee is the person who is leasing a vehicle from a dealer.


The lessor is the leasing company or dealer who leases a vehicle to a lessee.

Manufacturer's list price

This is a basic price before options, VAT or any applicable discounts.

Monthly payment

This is the agreed amount of money that the lessee has to pay to the leasing company on a monthly basis.These payments last until the end of the contract period, although they can be paid off early is the lessee decides that they want to.


An MOT is the Ministry of Transport's annual test which covers the safety of a vehicle, its roadworthiness and its exhaust emissions. Every vehicle on the road requires an MOT (unless it's under 3 years old), and if it fails, the fees need to be paid for repair or it will be allowed on the roads.

If a vehicle fails its MOT, it can result in a fine and in some cases can lead to arrest.

On-the-road price

The full sum that the Leasing company will pay the manufacturer for the vehicle, it's calculated like this:

  • The manufacturers list price
  • - The price of options
  • +The price of options
  • +The delivery charge
  • +VAT
  • +The Registration fee
  • +The Road Fund License
  • = On-the-Road-Price

Personal contract purchase

Personal contract purchase means that a person pays a certain amount over an agreed period of time for an agreement. The amount is paid to the leasing company through leasing payments and while you still have the right to drive the vehicle, the lessor still has ownership.

It's quite simple to hire purchase, but with one significant difference. At the end of the contract, you're able to pay a substantial fee which means that you can keep the vehicle as your own.

Personal use

Someone that leases a vehicle for their own use, this means that it therefore can't be used for business purposes and only a single person is able to drive the vehicle.

Purchase price

The price at which the funder will sell a vehicle at the end of the contract. Note that the contract holder cannot buy the vehicle themselves or through a third party.

Relief vehicle

The leasing company will provide those customers who select this option, with a car to use if theirs is off the road.

Maintenance package

A lessor will give a lessee the option to include maintenance as part of their monthly payments. This covers any servicing the vehicle requires, including: repairs, new parts, tyres, batteries and also exhausts. In some cases it will cover the MOT.

If you choose a maintenance package, then it's important to take note that any damage that is incurred from delivery, or through accidental damage or negligent damage will be payable.

Upfront costs

These are the costs that you have to pay before you actually enter into the leasing contract.

Car leasing Glossary and Key terms

If you're looking at any of the car leasing options that we provide (listed below), you'll certainly need to know all the finer details of what vehicle leasing actually involved.

You can speak to us about any of the following:

  • Business contract hire
  • Personal contract hire
  • Business contract purchase
  • Finance lease
  • Lease purchase

We understand that vehicle leasing can seem like a complicated process, which is just doesn't need to be. We've worked hard to put together this car leasing glossary which contains all of the vehicle leasing key terms that you'll need to know before speaking to the car leasing company.

If you have any questions about our leasing offers, be it Fiat leasing, BMW contract purchase or our Renault contract hire deals, please get in touch with us right away. We strive to offer exemplary customer services to each and every one of the customers we speak to, be it for personal or business leasing purposes.

You can contact us on 0344 745 1818, we'll be delighted to hear from you. So, if you have any questions on our leasing deals, you know what to do!

Find out what our customers love about us
As featured in ...