Vehicle leasing industry jargon buster (Update 2025)
The vehicle leasing industry is filled with terms and abbreviations. But understanding these key phrases is crucial to navigating leasing with confidence. That’s why we’ve created this easy to understand fuss-free (jargon free) guide to the key leasing terms.
A
AER: Advisory Electric Rate
As with advisory fuel rates, HMRC publishes an advisory rate for drivers of electric company cars. Hybrid cars are treated as either petrol or diesel car (see AFR).
AFR: Advisory Fuel Rate
These rates apply to employees using a company car to either reimburse employees for business travel in their company cars or when you need employees to repay the cost of fuel used for private travel. These advisory rates are published by HMRC and vary according to engine size. Business mileage can be reimbursed up to the level of the advisory rates without incurring any tax or NI liability.
AMAPs: Authorised Mileage Allowance Payments This is the maximum amount that can be reimbursed, free of tax and NI, to employees undertaking business mileage within a private vehicle. AMAPs are higher than AFRs, since HMRC recognises that business mileage in private cars incurs costs beyond fuel, such as depreciation and wear and tear.
Annual mileage allowance:
The mileage agreed upon in the contract, which impacts the monthly rental calculation. Exceeding the agreed mileage incurs additional fees (known as excess mileage charges).
AVF: Alternatively Fuelled Vehicles
Alternatively Fuelled Vehicles. A vehicle that runs on a fuel other than petrol or diesel – most often an electric, hybrid or hydrogen fuelled car.
B
Balloon Payment
This is a final payment of a financing agreement to satisfy the debt. It’s often aligned with the forecasted value of the car at the end of a contract.
BCH: Business contract hire
An agreement between a business (whether it be a sole trader, PLC or limited company) and a vehicle leasing company. This method of finance allows a business to lease a vehicle, or vehicles, for a fixed period of time and set amount of mileage. The vehicle is returned to the leasing company at the end of the contract.
BCP: Business contract purchase
An agreement between a business (whether it be a sole trader, PLC or limited company) and a vehicle leasing company. This method of finance allows a business to fund the purchase of a vehicle through a series of fixed monthly payments, similar to BCH lease rentals. To complete the purchase there will be a final balloon payment, but the business may choose to return the car at the end of the contract instead.
BEV: Battery electric vehicle
A vehicle completely powered by batteries.
BIK: Benefit In Kind
A taxable, non-cash benefit to an employee from an employer, such as a company car or fuel allowance.
C
Capital Allowance
The tax relief on the depreciation of an asset, such as a car. It’s usually spread over a number of years.
Capital Contribution
Contributed by the employee, this is a capital sum which goes towards the expenditure on a company car.
Clean Air Zones
A clean air zone (CAZ) is an area where local authorities are taking direct action to reduce NO2 emissions, and they fall into two categories: Charging and Non-charging. Non-charging CAZs do not impose fees on vehicles entering the zone whereas charging zones can vary their tariffs based on time of day, fuel type or vehicle classification.
CCT: Company Car Tax
Is the tax paid on any company car that is available for private use. Taxes will vary, depending on the car’s list price and CO2 emissions.
CO2 emissions
The carbon dioxide emissions associated with driving a vehicle. Successive governments have adopted policies intended to cut emissions, in order to limit the harmful effects of climate change.
Company car benefit
The taxable value a company car received by an employee as a benefit in kind within a tax year.
Congestion charge
London’s congestion charge zone covers central London. Vehicles entering the zone during operating hours must pay a daily fee. Battery electric vehicles can register for a discount, but this will end in December 2025.
Contract Hire
The leasing of a vehicle for a fixed period of time and set amount of mileage. Once the contract has expired, the vehicle is returned to the leasing company.
CPO: Charge Point Operators
Company responsible for managing, maintaining and operating electric vehicle charge point stations.
D
Depreciation
This is the loss in value of a vehicle over time, calculated as the difference between a vehicle’s purchase price and its selling price.
E
ECO: Employee Car Ownership
A scheme where employers offer employees a monthly salary allowance to spend on a car of their choice. Chancellor Rachel Reeves is looking to end this type of car scheme.
E-Rev: Electric Range Extended Vehicle
Range extended electric vehicle. Has a plug-in battery pack and electric motor, as well as an internal combustion engine (ICE) used as a generator to recharge the battery if it cannot be recharged from a chargepoint.
ET: Early termination
If you decide you would like to cancel your lease contract before its end date, this is known as early termination. Usually you will have to pay a charge to terminate the contract.
EV: Electric vehicle
A Battery Electric Vehicle. A vehicle that runs on electricity alone, with motors running from an onboard battery that must be recharged.
EVSE: Electric vehicle supply equipment
EVSE or electric vehicle supply equipment – also known as a chargepoint! You can read a comprehensive list of EV terms here.
Excess Mileage
When you first arrange your lease, you will agree a set mileage with your lease provider that you expect the car to cover each year – it’s important to be as accurate as possible. Excess mileage is an additional fee you will be required to pay if you exceed the mileage allowance on your lease contract.
F
Finance Lease
A lease which gives the business who is leasing the vehicle the risks and rewards which come with the ownership of the asset in terms of its change in value.
Fleet Insurance
A type of vehicle insurance policy which can cover multiple vehicles such as cars and commercial vehicles.
Fuel Duty
This is a type of excise tax that is applied to fuel sales and is included in the price you pay for petrol, diesel or any other fuels used in a vehicle.
FW&T: Fair Wear and Tear
When you return your car at the end of its lease, your lease provider will perform an independent inspection of the vehicle to check the condition of both its interior and exterior. Fair wear and tear covers what is expected of the car’s condition, depending on the age and mileage of the vehicle. Anything outside this, such as missing or broken items may be susceptible to charges.
FYA: First Year Allowance
A special form of capital allowance in which the business purchasing the vehicle can claim tax relief on the full purchase price immediately, rather than gradually over the course of years.
G
Gap Insurance
Insurance that covers the difference between the vehicle’s market value and the remaining lease payments in case of total loss or theft.
GFV: Guaranteed Future Value
A term used to describe how the balloon payment in a contract purchase agreement is calculated.
Green Car Scheme
A salary sacrifice for electric vehicle scheme. (See Salary Sacrifice).
Grey Fleet
The term grey fleet is used to describe a vehicle that is used for business travel but is owned by the employee.
H
HP: Hire Purchase
An agreement where ownership of the vehicle does not change name (i.e. from the finance company to the individual) until an option to purchase has been satisfied.
Hybrid A petrol engine running alongside an electric motor.
Hydrogen
Powered by a fuel-cell stack, which uses hydrogen to produce electricity.
I
ICE: internal combustion engine
Burns petroleum-based fuel to generate heat, to drive the vehicle’s transmission and wheels.
L
Lead Time
This is the time between the order placement and the delivery of the vehicle from the manufacturer, which can vary between stock and factory-ordered vehicles.
Lessor and Lessee
A lessor is a person or organisation that owns an asset, whereas a lessee is a person or organisation that makes payments in instalments to use the asset.
M
MID: Motor Insurance Database A central record of all insured vehicles on the roads in the UK that is managed by the Motor Insurers Bureau.
Motor Insurance Motor insurance, also known as vehicle insurance, provides financial protection for cars and commercial vehicles and other road vehicles against risks such as accidents, fire and theft.
O
OEM: Original Equipment Manufacturer
Sometimes car manufacturers refer to themselves as OEMs or original equipment manufacturers – however this can refer to any manufacturer that produces parts.
P
P11D Value
List price of a company car, which company car tax is based on. Includes VAT and delivery charges but excludes first year registration fee and annual vehicle excise duty (road tax).
PCH: Personal Contract Hire
An agreement for a vehicle between an individual and a vehicle leasing company, where said individual leases a vehicle for a fixed period of time (usually long-term) and has a set amount of mileage.
PCN: Penalty Charge Notice
A civil charge issued by the council which is usually given for parking/waiting offences. Can also be issued for driving offences, such as using a bus lane.
PCP: Personal Contract Purchase
A purchase agreement for a vehicle in instalments by an individual through a finance company. Payments are usually set at an equal amount throughout the contract and it gives the individual the option to purchase the vehicle at the end of the agreement.
PHEV: Plug in electric hybrid
Plug-in hybrid electric vehicle
PiCG: Plug-in vehicle grant
Subsidy from the Government supporting the purchase of certain kinds of electric vehicle.
PPM: Pence Per Mile
When you first arrange your lease, you will agree a set mileage with your lease provider that you expect the car to cover each year – it’s important to be as accurate as possible. Pence per mile excess mileage is an additional fee you will be required to pay if you exceed the mileage allowance on your lease contract.
R
RDE: Real driving emissions
Real driving emissions. Part of the type approval test process used to certify the emissions of a vehicle. RDE aims to ensure the test result reflects real-world use.
Repair, Maintenance and Tyre (RMT)
An optional service that looks after the repair, maintenance and tyre replacements of a vehicle over its contract.
Reschedule
Arranging a new scheme of repayments for a vehicle lease based on a new contract term or mileage.
RFL: Road Fund Licence - (see VED, Vehicle excise duty)
RV: Residual Value
Estimated value of a vehicle at the end of a lease agreement.
S
Service, Maintenance and Repair (SMR) - See RMT
S&LB: Sale and Leaseback
This is a type of transaction where the owner of a vehicle sells it and then leases it back from the buyer.
Salary Sacrifice
A scheme through which businesses offer employees the option to give up part of their salary in return for a benefit in kind, in this case a car.
SORN: Statutory Off Road Notification
This declares that a car is no longer on UK roads. You will not have to pay tax or insurance if your car falls under this category.
T
TCO: Total Cost of Operation
This is the total cost of running the vehicle– including finance payments repairs, fuel, taxation etc. over its lifetime.
TWDV: Tax Written Down Value
The value of any lease car for tax purposes after Writing Down Allowance (WDA) has been applied each year.
U
ULEV: Ultra-low emission vehicle
An official designation for a type of car or van that emits extremely low emissions. Defined as having CO2 emissions no greater than 75 g/km.
ULEZ: Ultra-low emission zone
Operational in London vehicles have to meet the latest emissions standards or pay a fee.
V
VED: Vehicle Excise Duty Vehicle Excise Duty Often referred to as ‘road fund licence’ or ‘road tax’, this is an annual payment which has to be made on any car which is on the roads in the UK.
VIN: Vehicle identification number Vehicle identification number. Known as a car’s fingerprint, this is a vehicle’s unique identification code comprised of 17 digits and capital letters. No two vehicles in operation have the same VIN.
W
WDA: Writing Down Allowance Calculated as a percentage of a car’s value, this is the sum of the capital allowances that can be claimed in a calendar year.
WLC: Whole life cost
Whole life cost (See TCO, Total cost of operation)
WLTP: Worldwide Light Vehicle Test
The Worldwide-Harmonised Light Vehicle Test Procedure (WLTP) is the type approval process through which vehicles are certified for fuel consumption and CO2 emissions.
Z
ZEV – Zero emission vehicle
A vehicle that emits no harmful pollutants at all from the exhaust pipe.
ZEV Mandate: Zero emission vehicle mandate
The ZEV mandate sets out the % of new zero emission cars and vans that vehicle manufacturers are required to sell each year in the UK.
Important information:
This blog was originally published on leaseplan.com website. The views expressed may no longer be current and any reference to specific vehicles or products is for reference only. This information is not a personal recommendation for any particular vehicle, product or service - if you are unsure about the suitability of a product, you should consult with an expert.