We've outlined a few key leasing terms to help you understand the leasing process. This includes terminology unique to leasing as well as a variety of phrases that are generally used throughout the automotive industry.

Annual mileage

The cost of leasing a car is partially determined by how many miles the driver plans to drive each year. Your leasing contract will typically include an annual mileage range of 5,000 to 50,000 miles.

As stated in the contract, the agreed-upon mileage is allowed each year without incurring additional fees.

Arrangement or processing fee

The arrangement fee or processing fee is applied to cover the cost of processing the finance application and dealing with the contract documentation.

Benefit in Kind (BIK)

Benefit in kind is a taxable benefit obtained by employees in addition to their salaries such as a company car allowance and fuel allowance. Benefit in kind can also be referred to as notional pay, fringe benefits or perks. These benefits have monetary value, so they must be regarded as taxable income.

Business Contract Hire (BCH)

Customers who fall under one of the following categories—self-employed, sole traders, LLPs, partnerships, limited companies, or business owners—are eligible for business contract hire. Most BCH clients must, if at all feasible, have been in business for at least a year. Prices for business contract hire are indicated on our website as plus VAT.

For more information, visit our guide to business car leasing.

Car leasing

The phrase "car leasing" or "van leasing" refers to a variety of contracts and periodic agreements. In these contracts, the driver generally does not own the vehicle but instead leases it for a monthly fee. Contract leases and financing leases are common examples. Some types, like contract purchases, give you the option to buy the car when the deal is through.

CO2 emissions

While it's good to be concerned about the environment, in the context of vehicles, CO2 emissions are crucial since they, along with the kind of fuel you use, influence your tax rate.

Contract hire

In a contract hire, a business or person hires the vehicle and uses it for a predetermined amount of time. Through Vehicle Contracts, you can lease a car for a predetermined amount of time—typically 24, 36, or 48 months—and a set annual mileage. The client makes a down payment (initial rental) as well as recurring monthly instalments. The car is returned to the company at the end of the contract term or period.

Contract term

The length of your contract impacts the size of your monthly payments, just like annual mileage. The common terms that are offered are 24, 36, and 48 months.


Whether you live in a city or a rural area, if you want to lease a car from Vehicle Contracts, we will try to deliver it right to your door, but there are certain restrictions.

All customers located in England, Scotland, and Wales will receive free delivery. Please be aware that additional delivery fees might be necessary for several Scottish locations depending on the dealership who supplies the vehicle. For more information, please contact your leasing consultant.

Delivery will be reliant on the financial provider for clients in Northern Ireland. Others may permit transportation between the UK and Northern Ireland in accordance with new import restrictions, while some will insist that the car be purchased locally. Prior to delivery being scheduled, customers who want to meet a delivery driver at a port on UK mainland must complete the proper importation paperwork with a reputable shipping company. For more information, please contact your leasing consultant.


Depreciation is calculated by the reduction in value of the vehicle as it is used due to wear and tear and the annual mileage covered.

The calculation is the difference between the purchase price and the estimated value, and the end of the contract based on the contractual mileage (excess mileage will also be charged on top).

European New Car Assessment Programme (Euro NCAP)

The UK and other EU nations support the widely acknowledged European New Car Assessment Programme, which evaluates the safety of new cars. Although evaluation is not required, a high Euro NCAP rating is a useful marketing tool.

Excess mileage charge

You would typically be charged for any additional miles you drive if you go over the set mileage. Typically, this comes in a pence per mile calculated format.

Fleet management

A group of vehicles is referred to as a fleet, and fleet management is the task of overseeing a company's fleet of vehicles, including financing, servicing, and maintenance.

Fuel consumption

Data on the number of miles per gallon (MPG) is available from Vehicle Contracts website. It goes without saying that fuel is not included in the leasing (or purchase) price, so keep this in mind when deciding which vehicle type to lease. For more help on choosing a fuel type that’s right for you, please visit our guide to choosing a fuel type.

Initial payment

You make the initial payment for your leased car at the start of the contract agreement. Typically, it is 3, 6, or 9 months of your monthly rental. The amount of the monthly rental payments will be less with a bigger initial payment.

Insurance group

In the UK, vehicles are assigned to one of fifty insurance groups. A high-performance vehicle is more likely to land in band 50 than a Fiat 500 since the groups are meant to be in escalating order of cost.

Please be aware that some insurers don't follow these suggestions and instead base premium calculations on their own data.

Manufacturer list price

In order to make it simple to compare the manufacturer's list price with the various leasing options, we clearly indicate it on our deal pages. The price of options, delivery fees, VAT, and a Road Fund Licence are included in the Manufacturer's OTR and can be supplied on request. For more information, please contact your leasing consultant.

Payment profile

The initial rental payment amount, followed by the number of ongoing monthly instalments, is displayed for example as: 3 35, 6 35, 9 35, 3 23, etc.

Personal Contract Hire (PCH)

Similar to business contract hire, personal contract hire—also known as personal leasing—operates with slightly higher charges that are advertised with VAT included (business contract hire excludes VAT as the prevailing rate). It is created especially for personal clients.

Residual value

The figure used to forecast a vehicle's value over time is called residual value.

Salary sacrifice

Salary sacrifice is an arrangement where employers may make available to their employees – the employee permits to reduce their earnings by an amount identical to their pension contributions. In exchange, the employer then agrees to pay the total pension contributions. For more information on what this is all about, please visit our guide to salary sacrifice.

Special offers

On our leasing special offers page, you can get amazing offers and you can easily locate high value offerings at discounted prices at Vehicle Contracts.

Van lease

The phrase "van leasing" refers to a variety of contracts and periodic agreements. In these contracts, the driver generally does not own the vehicle but instead leases it for a monthly fee. Contract leases and financing leases are common examples. Some types, like contract purchases, give you the option to buy the car when the deal is through.