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help & information > jargon explained

APR - Annual Percentage Rate

The APR is a standardised version of the interest rate, designed to allow you to compare different loans. Generally, a lower APR will signify a better deal, but be sure to compare all aspects of the loan: the Total Amount Payable can sometimes give you a better indication of how much a loan will actually cost you over its lifetime.

Balloon Payment

The final payment on a contract. This is calculated at the outset, based on the anticipated resale value of the vehicle at the end of the contract. The monthly payments are lower, because payment of a large amount is deferred until the end of the contract.

BIK - Benefit in Kind

The term used by HM Revenue & Customs to describe any part of a salary not paid in cash, eg. a company car or free fuel. Company car tax is now based on the list price of the vehicle (the "P11d value"), and its authorised CO2 rating.

CO₂ - Carbon Dioxide Emissions

The carbon dioxide emissions rating of the vehicle, expressed in grammes per kilometre (g/km). In general, the lower the CO2 rating, the more environmentally friendly the vehicle. Company car tax and road tax are now based on CO2 emissions ratings.

Disallowed VAT

On Contract Hire or Finance Lease (where the rentals attract VAT): if a car is made available for personal use, only 50% of the VAT can be reclaimed. The remaining 50% is disallowed. This restriction does not apply where there is no personal use, eg. for a pool car.

Effective Rental

On Contract Hire or Finance Lease (where the rentals attract VAT): the actual cost of the rental, taking into account the disallowed VAT.

Excess Mileage Charge

On Contract Hire, Contract Purchase or Personal Contract Purchase (where the vehicle returns to the finance company at the end of the contract): the charge levied when a vehicle returns to the finance company and its mileage has exceeded the agreed mileage. This is expressed in pence per mile (ppm). It is normally possible to amend the agreed mileage during the contract, if you find that you have under- or overestimated the number of miles you actually travel.

GAP Insurance - Guaranteed Asset Protection

An insurance product which covers the difference between the finance company's settlement figure and your insurance company payout in the event the vehicle is written off by your insurer. It is designed to ensure you do not have a shortfall to pay in these circumstances. Visit the Insurance Centre for full details of this and other insurance products.

OTR - On The Road Price

This is the total price of the vehicle, including VAT, Road Tax and delivery to the dealer.

P11d Value

The list price of the vehicle on the day before the vehicle was registered. This is the value used to calculate company car tax. It is named after the P11d form, which is the Revenue & Customs form used by an employer to declare benefits in kind, such as a company car.

Spread Rentals

The standard payment profile of a contract. Your advance rental is used to reduce the amount of the subsequent monthly rentals. For example, on a 36 month contract, you pay three rentals in advance followed by 35 monthly rentals. This amounts to 38 rentals in total, which reduces the amount of each rental, since the balance to pay is spread over a greater number of rentals. Compare with Terminal Pause.

Terminal Pause

A type of payment profile. Your advance rental is used to pay off the final rentals of the contract. For example, if you pay three rentals in advance on a 36-month contract, one of the advance rentals will be used to cover the first month. The remaining two rentals will be used to cover the last two rentals. No payment will be due for these months. For six payments in advance, the final five months would be free. Compare with Spread Rentals.

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