12 Vehicle Leasing Phrases Defined

Here are 12 commonly used vehicle leasing phrases that you’ll encounter when leasing a vehicle from ALD Automotive:

Vehicle Leasing Phrases Defined

1. GAP Insurance

Guaranteed Asset Protection (GAP) is an insurance that protects the lessee against unwanted scenarios while the vehicle is under their care. Some of these scenarios include theft, vehicular accident or vehicle damage beyond repair.

2. Mileage Allowance

A fixed number of miles that the lessee can drive, the yearly maximum for a leased vehicle are 10,000 miles. Driving beyond this allowance can lead to penalties. Some companies allow you to extend the mileage allowance but they are subject to extra payments.

3. Excess Mileage Charge

This penalty is charged to the lessee for driving more miles than the contract permits per year. Usually expressed as Pence Per Mile (PPM), the lessee will be required to pay a certain amount of the penalty charge per mile.

4. Excess Wear and Tear

This contract charges the lessee an extra fee in case the car suffers damages due to improper maintenance.

5. Acquisition Fee

A non-negotiable fee for processing a lease, the acquisition fee can range from approx. £250 to £500.

6. Money Factor

This is the interest rate although it is expressed differently. The money factor is usually expressed in confusing numbers such as “0.0088, 0.0044…” If the Money Factor is 0.0088, you will have to multiply it by 2,400 to get 21.12%.


The Manufacturer’s Suggested Retail Price (MSRP) is sometimes referred to as the retail price. It is the sticker price of the car or any vehicle that has no add-on from the dealer.

8. Security Deposit

A refundable deposit that is the equivalent to a monthly lease payment, it serves as the leasing company’s protection against any damage that may be caused to the vehicle. Not all car leasing companies charge or require a security deposit.

9. Personal Contract Purchase (PCP)

After the leasing contract has ended, the car will need to be returned. Personal contract purchase (PCP) gives the lessee the option to purchase the car at the end of the leasing contract.

10. Residual Value

The residual value is the anticipated value of a vehicle at the end of the lease. It is usually expressed as a percentage.

11. Capitalised Cost Reduction

Capitalised cost reduction or cap reduction is an upfront lease payment or down payment. Cap reduction affects the cost of a monthly payment. The higher the cap reduction, the lower the monthly payment.

Leasing a car can be a daunting experience but never sign any contract uneducated. Call ALD Automotive on 087000 111 81 and speak to one of their lovely people, who will be happy to guide you through the whole car leasing process.

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