Is there a better term than Hinayana? I'm aware that using the term Hinayana isn't ideal as it has derogatory undertones - being coined by the Mahayana school to differentiate themselves from what had gone on before. The implication being that the Greater Vehicle of the Mahayana is better than the lesser vehicle of the Hinayana.

So is there another term that can be used? I have often heard Theravada being used interchangeably. I'm not convinced that's right since I'm sure there are other 'Hinayana ' schools that aren't Theravadan, particularly considering ancient schools that don't exist now.
As I was just explaining in a comment to one of my answers, the term "Hinayana" is widely used by Tibetan Buddhism teachers to refer to basic/elementary/foundational (and because of this often simplified) aspects of Buddha-Dharma. If you'd go to their lectures, you'd hear this notion of Hinayana-understanding vs. Mahayana-understanding discussed in almost every other lecture. Amongst tens of books written by the teacher I consider my Root Guru, Chogyam Trungpa Rinpoche, a recently published 3-volume set has its first book, of 680 pages, dedicated to Hinayana, with this word used on almost every page.

Again, to emphasize, "Hinayana" is not used to refer to Theravada at all. Rather, it is used in two senses: one, to refer to a primitive interpretation of Buddha-Dharma (by a member of any school, and of any standing, but usually a beginner, or a "senior junior") and two, to refer to the first phase of Buddhist upbringing, during which the student is introduced to the most basic discipline and doctrines, that serve as the foundation for subsequent education &amp; practice.

Imagine two teachers discussing their students with each other: "I have 3 Hinayana-level students, 2 Mahayana-level, and 1 Mahamudra" or "This guy is stuck at Hinayana level, perhaps I should try Kriyayogatantra..."

Whoever thinks the term is derogatory misses the point. The term is indeed used to refer to "primitive" or "elementary" level of Dharma. But we don't consider "elementary education" a derogatory term, do we? Or perhaps, in countries where Parliament comes in two houses, we don't consider The Lower House of Parliament a derogatory term? And when the rental cars come in three classes: economy, business and luxury -- we do not insist that the use of the term "economy" should be discouraged because it hurts the feelings of lower-income people etc.

The term "Hinayana" is an important term, used by thousands of gurus over thousands of years to teach their students a very important point: that Dharma, like any other non-trivial area of human activity goes far beyond simple logic, and requires depth, sensitivity, ability to compromise, to go beyond black-and-white view of the world, to juggle multiple contradicting needs, to understand different perspectives, and in general to not get stuck at the level of mechanical application of formulaic if-then-else rules.

Besides the negative connotations ("black-n-white understanding of the beginner"), the way it was presented by Chogyam Trungpa Rinpoche I feel "hinayana" also has positive connotations like "fundamental basic teaching" and "spartan discipline".

Here's how Trungpa praised hinayana in his famous short talk, Never Forget Hinayana (edited for readability):


  Good evening. Ladies and gentlemen, it is a very profound time and profound experience for us to realize how important is the hinayana teaching.   
  
  The hinayana teaching should not be regarded as something that you can just carry out and then get rid of, or discard. The hinayana teaching is the life force that carries our practice and discipline, which goes on continuously. From that point of view the hinayana should be regarded as life’s strength.   
  
  It is [important] for us to understand that basic life [force], that basic strength. It is very important to us, and inseparable from our lives and our existence as individuals. It is the life force that carries [you] on whether you are going through the hinayana, mahayana, or vajrayana [levels]. It is our substance and our sustenance.   
  
  NEVER FORGET HINAYANA!