Contract Hire & Leasing Glossary

APR

Annual Percentage Rate. The annual rate of interest paid in an agreement.

Balloon Payment

A final payment incorporated into a Contract Purchase or Personal Contract Purchase agreement. This is set at the start of the contract.

BIK

Benefit in Kind. This is called ‘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, forms part of the maintenance contract.

CCA

Consumer Credit Act. Enacted in 1974 to protect individuals, unincorporated companies (not limited) and partnerships where credit does not exceed £25,000. The agreement has a cooling off period and is cancellable. (Referred to as a regulated agreement). Post mid-night 30th May 2005 there is no £25,000 limit.

Cherished Plates

Same as personalised number plates. Customer can assign them onto Lombard vehicles.

Choices

The Personal Contract (PCP / PCH) scheme Lombard operates for RBS & NatWest employees

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 Licence 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 £38.00 (no VAT is charged). The government levies this on all new vehicles.

Formal extension

Also known as Secondary Period. When a customer wants to extend their contract by 3 months or more.

FSA

Financial Services Authority. This is the regulatory body for the financial services industry and ensures all companies conform to a strict code of conduct.

HPI

Abbreviation for Hire Purchase Information. HPI provide a search facility of the database maintained by HPI Limited. This search will report, amongst other results, whether a vehicle or other asset is subject to any interests of another party, usually another Finance House.

Informal extension

When a customer wants to extend their contract for a short period, but doesn’t want to be tied to a formal extension.

Maintenance

This is offered with agreements and includes routine maintenance and servicing (at manufacturer’s recommended intervals), mechanical repairs and replacement parts, tyres, batteries and exhausts. Lombard’s obligations do not cover any of the above in the result of accidental / deliberate or negligent damage to the vehicle.

Manufacturer’s List Price

This is the manufacturer’s basic price of the vehicle, excluding options, VAT and before any discount is applied.

On the Road Price

This is the full amount, which Lombard will buy the vehicle for from the dealer. It is made up of the following:

List price
Plus Option price
Less Discount
Plus Delivery Charge
Plus Dealer Fitted Options
Plus VAT
Plus Registration Fee
Plus Road Fund Licence (RFL)

PCH

Abbreviation for Personal Contract Hire. Offers all the benefits of Contract Hire to a private individual.

PCP

Abbreviation for Personal Contract Purchase. Offers all the benefits of Contract Purchase to a private individual.

Relief Vehicle

If this option is selected, the customer is provided with a vehicle in the event of their vehicle being off the road.

RFL

Road Fund Licence. Records that Vehicle Excise Duty (VED) for the vehicle has been paid. Currently regulated by CO2 emission levels and fuel type.

Sales Agency Agreement

Option with Contract Purchase agreements. Allows customer to exercise their options at the end of the agreement. If option is not taken out at the inception of the agreement the customer will have to pay the balloon payment and keep the car. Currently set at £30 + VAT for Core Customers and £150+VAT for PCP.

Service Rental

The rental element that covers the maintenance, relief vehicle and breakdown services, where selected. NB. With contract purchase, the service rental also includes the charge for RFL.

Sale and Leaseback

A facility where we buy a customer’s existing vehicle fleet and then lease them back to the customer. Allows customers, where they originally purchased their fleet outright, to enjoy the benefits of contract hire.

SMR

Abbreviation for Service, Maintenance and Repair.

Spread Rental

A type of payment profile. The rentals are spread throughout the life of the contract e.g.3 year deal would be, 3+35 agreement, the customer pays 3 advance rentals then a monthly rental for the next 35 months and there is no rental free period at the end.

Terminal Pause

The rental free period customer receives which corresponds to the number of advance rentals paid. On a 3 year deal would be, 3+33 agreement, the last 2 months of the contract are rental free.