GUIDANCE: WHAT IS CREDIT HIRE? CAVEAT EMPTOR
- Gavin Renwick
- Apr 4
- 13 min read
Updated: Apr 7
WINNING AN RTA CASE WITH CREDIT HIRE CAN STILL LEAVE YOU INSOLVENT.
HE WHO RIDES A JAGUAR CAN BE AFRAID TO DISMOUNT.
Road Traffic Accident (RTA) claims for Repair Costs, Personal Injury and Loss of Earnings or Profit have existed since the horse & cart. However, now a Negligent Driver collides with a Ford Focus which is not quite a Jaguar, admits they are liable, just to receive a catastrophic bill for a luxurious sports car the fat-cat insurers won’t pay. There is a new predator on the road and that wild cat is ‘Credit Hire’ where the law of jungle, is actually based on shipping law. Feline confused? That’s purrfectly understandable.
This article is the first in a series that will help you spot the woods from the trees when hiring a replacement car on credit. It will explain why an Innocent Driver has to go to court once trapped in a Credit Hire agreement and why a Negligent Driver can escape the jaws of liability despite admitting to the judge, that the crash was entirely their fault.
As with all content published on this website, this article does not constitute legal advice and you are referred to the terms and conditions of use accordingly. It is designed as an introduction for lay individuals, very briefly touching upon the legal issues that will be expanded upon in subsequent articles. For the avoidance of doubt, the cat jokes have had their ninth life.
S U M M A R Y
In concise summary: ‘Credit Hire’ refers to a driver hiring a replacement car on credit from a third party ‘Hire Company’ rather than their insurer. As it is on credit, the hire charges will come at a premium due to the Hire Company incurring costs despite not only receiving nil payment up-front but by also running the risk that it shall not be paid at all.
RTA Claims are based in Tort i.e. drivers owe each other a duty to drive carefully. The Negligent Driver breaches that duty by doing or conversely failing to do something a reasonable driver would have done. This causes an RTA and the general rule is that ‘the Negligent Driver’ indemnifies (pays for) the loss they caused the Innocent Driver. [1]
HIRING A REPLACEMENT VEHICLE:- While the Innocent Driver’s car is off the road, they will require a replacement vehicle. Insurers instead of offering ‘THE Courtesy Car’ under their policy of insurance will often now offer ‘A Courtesy Car from a ‘trusted’ third party provider i.e ‘the Credit Hire Company.’ This distinction will be obscured.
THE CREDIT HIRE AGREEMENT:- The Credit Hire Company will send the Innocent Driver ‘a Credit Hire Agreement.’ This is a legally enforceable contract which within its terms and conditions will state that the Innocent Driver retains a liability to pay whatever credit hire charges are outstanding. Usually, the Innocent Driver will just assume the Negligent Driver’s insurers will just pay the costs especially when they are told this by the Credit Hire Company over the phone. But that is almost never in writing.
WE ADMIT NOTHING – OR DO WE? - The Negligent Driver’s insurers will usually admit liability for the RTA. However, they will challenge quantum. This means that they accept liability for the RTA and in principle should pay something but as per their standard defences; they should not be liable for Credit Hire Charges as the:- Credit Hire Contract is unenforceable because they don’t understand it and/or the Innocent Driver should not have Hired in the first place because it’s a failure to mitigate but; if that is all wrong then we say they hired for far too long, at far too higher rate which is far too in excess, AND the hire definitely should NOT have been on CREDIT terms because that is excessive and the Innocent Driver needs to prove they impecunious and to top it all off; the additional drivers, collision damage waiver and all additions are just taking the proverbial. So, we’ll fight this on the beaches we’ll [Go to Court].
JUDGEMENT:- The parties cross-swords before a Judge in the aftermath of which the court will order either that:
The Innocent Driver recovers ALL THE MONEY for Hire! – The court will order the Negligent Driver to pay the full sum of the Credit Hire Charges to the Innocent Driver. The Innocent Driver then puts the FULL SUM into the pocket of the Credit Hire Company. Consequently, the 1 year fierce court battle comes to an end and the Innocent Driver gets – Absolutely Nothing but the debt to the hire company is settled. OR;
The Innocent Driver recovers SOME MONEY for Hire: - Unless the Innocent Driver was impecunious i.e. broke to begin with, the court will often find that there was NO REASON TO HIRE ON CREDIT. Consequently, the premium rate is excessive and the court will limit the Negligent Driver’s liability to what it considers fair, usually <25% of the sum claimed which all goes into the pocket of the Credit Hire Company. Consequently, a 1 year fierce court battle comes to an end and the Innocent Driver gets – The First Payment to the Credit Hire Company the remainng debt for which, they will need to use their own funds to satisfy . OR;
The Innocent Driver recovers NO MONEY for Hire: - It Is not rare but it is uncommon for the court to find that there was absolutely no reason for the Innocent Driver to hire a replacement vehicle at all. Consequently, the Negligent Driver is not liable and the Innocent Driver has no money to put into the pockets of the Credit Hire company. A 1 year fierce battle comes to an end and the Innocent Driver gets – A Very Large Debt to the Credit Hire Company[2]. The Court Victory has thus ended with a massive financial debt that may ultimately lead to insolvency but inevitably, increases the risk.
THE FACTS, THE FIGURES, THE COSTS
Credit Hire is a murky business with serious and long lasting consequences; insofar as going into liquidation and having your assets seized to pay for a car you thought, was a ‘courtesy car’ can be.
Should that not concern you, consider that the average cost of hiring a vehicle as of 2024 was £212 p/d.[3] That means the cost of hiring the vehicle is on average >£6500 p/m + Extras. Even the most benevolent insurer will pass the cost of these onto their drivers inflating the premiums exponentially and the author has successfully dealt with claims in excess of >£75’000n – Just to Hire a Replacement Car.
Due to the matters aforesaid; the FCA has now started taking it seriously and set up a dedicated unit for consumers whom have fallen into the credit spiders web
C A V E A T E M P T O R
Every sane road user and some of the others; understand/accept that they owe other road users a ‘duty of care’. That means if a Negligent Road user (hereafter ‘Negligent Driver’) crashes into an Innocent Driver, they should pay to put the Innocent Driver back into the position they were, but for RTA (i.e. they don’t profit from the crash but they don’t suffer a loss.) As drivers on the road are legally required to have insurance, most people assume that means the insurers will pay for everything. That is benighted.
An RTA insurer is only liable to indemnify their policyholder/driver for losses arising from the RTA. In most cases, losses stemming from the RTA are obvious i.e. Personal Injury, Vehicle Repairs and Policy Excess. To an Innocent Driver, hiring a replacement vehicle (i.e. A Courtesy Car) would obviously fall under this category. Well Caveat Emptor because it does not. Why? The endless conflict between tort and contract.
This is recreation of a typical exchange at court involving the Negligent Driver and the Innocent Driver: For greater scope, it is amalgamates advice to both sides using candid language to be clear.
(1) Tort & Negligence – This refers to the law of writing wrongs the most common of which is Negligence i.e. the Omission to do something which a reasonable man, guided upon those considerations which ordinarily regulate the conduct of human affairs, would do, or doing something which a prudent and reasonable man would not do[4].” Simply put, Drivers should not crash into each other and the one that causes the crash is Negligent.
Negligent Driver Says:- So What?
(2) Tort, Negligence & Duty of Care – As repeatedly stated, all drivers on the road owe each other a duty of care. That is a LEGAL duty of care and which means, if you breach your duty of care by negligently crashing into an Innocent Driver, The can sue you!
Negligent Driver Says:- For What?
(3) Tort, Negligence & Foreseeable Loss: - A Negligent Driver is only liable for ‘Foreseeable Losses’ i.e. its reasonably foreseeable that if they crash into another driver they will damage the car, injure the passengers and cause a policy excess. As a side point this does NOT have its roots in RTA Law but in Shipping Law[5]! So the question becomes was it foreseeable that the innocent driver would hire a vehicle?
Negligent Driver Says: Well yes but no well - Firstly was their car legally on the road to begin with? Did they have to hire at all or could they not have used the bus or another car? Did they have to hire that long? Could the garage have just have fixed it quicker? Did he really have to hire A JAGUAR? Does the cost have to be that high? How do we know they’re actually broke? Where are the bank records! I say I AM THE ONE BEING TAKEN FOR A RIDE MATE! How is this legal?
(4) JUDEMENT: - The above are all valid points, often raised in Defences and are rooted in age old principles of foreseeability, remoteness of damage i.e. contractual shipping law. For the purposes of this article; let us assume the Innocent Driver went to court, instructed someone else and did not recover the full sum of the hire charges or any at all. The court orders the Negligent Driver to pay some of the hire charges and the hire company wants the rest.
Innocent Driver Says: - Screw That! (a) I have Insurance so they will pay, (b) it was a Courtesy Car so I am not liable for it anyway and (c) they told me I wouldn’t have to pay if my claim failed. I AM AN INNOCENT MAN!
(5) Contract vs Tort – Respectfully Innocent Driver; the Court has just found that your hire charges or the full sum of your hire charges did not arise from the RTA i.e. the Negligent Driver. They are not recoverable under tort. So all have are your contracts which: -
The contract of insurance you have with your insurer: - These terms will say they’re only liable to indemnify you for those losses arising from the RTA. The court just said your hire charges were not and so – you are on your own there mate.
The Courtesy Car -vs- A Courtesy Car: - Under your policy of insurance you may have had The Courtesy Car. However; that is not the same as ‘A Courtesy Car.’ What is the difference well, the former is under a policy of insurance and so falls under the contract above. So your insurer would pay that because it is The Courtesy Car under your insurance. But not shock you, insurers don’t want to incur costs and may have said you get ‘A Courtesy Car’ from someone else i.e. a Hire Company or you might not have had any Courtesy Car under the your Insurance contract. So;
Contract for the hire of vehicle? – The terms & conditions of the contract will say that you are liable for the hire charges [full stop]. They will not say (or are unlikely to say) that the hire charges are limited to what you recover. To use another example; when/if you buy a phone on contract; it will say that you are liable to pay your phone charges. A condition of this will not be if you win a court case and get a ton of money. You just entered into a legally binding agreement to pay the charges come what may.
Innocent Driver Says: - But, but, but I was told by the hire company I would not have to pay these if I didn’t win! My insurer told me it was a courtesy car! I never read the agreement. How am I supposed to understand all this 'law talk.'
(6) Misrepresentation – The arguments you raise are about the enforceability of your contract for hire charges. You can of course stand up in court and state that the contract should not be enforceable but respectfully, the court is NOT going to be persuaded to order the Negligent Driver to pay hire charges, if the Innocent Driver stands up in court and argues against them. You are essentially arguing that someone else should pay your liabilities because you were conned by on hire fraudsters whom are as common as muck. If you have been a victim of Misrepresentation, then subject to the court finding the same, it may be voidable. That however; will require separate legal proceeding and until then, you retain the liability to pay for them. Simply put, Caveat Emptor
Both Drivers: What in the Abyss does that mean?
(7) CAVEAT EMPTOR - It means ‘Buyer Beware’ i.e. ask the right questions, read what you are signing and if you don’t understand it – seek legal advice. So why in the abyss is Credit Hire or any type of third party hire stemming from an RTA legal?
DAMED IF YOU HIRE – DAMED IF YOU DON’T - ITS CALLED MITIGATION
When the Innocent Driver is losing money by having his car off the road they can claim for their Loss of Earnings from the Negligent Driver under tort i.e. that loss stems from the RTA and was reasonably foreseeable. BUT[6] ONLY IF YOU HAVE ATTEMPTED TO MITIGATE YOUR LOSS BY TRYING TO HIRE A VEHICLE. To expand: -
If you need a car for work especially if you are self-employed; every day you are off the road it is costing you or someone else money. This is imaginatively referred to in law as ‘a Loss of Earnings’ or when the loss is to a third party, it can be a subrogated claim. For the purpose of this article we will use the former.
As the Loss of Earnings stems from the RTA, despite being economic, the Innocent Driver an claim for this from the Negligent Driver under the tort of negligence. BUT -
There is a duty on all of us to ‘mitigate our loss’. It is expected that a reasonable man would stem his loss asap rather than just let someone else pick up the bill. When the Loss of Earnings is due to you not having a car, The Law Expects you to Get a Replacement Car.
Should you have The Courtesy Car under your insurance policy, then PROVIDING it is delivered to you quickly AND it covers your needs most consumers will accept it. BUT: -
Often The Courtesy Car does not fit the bill e.g. It may not be suitable for taxi driving, transport of goods or people with disabilities more often, it will take a few weeks to be delivered. So, your financial loss is ongoing. Equally;
It is often a consequence of The Courtesy Car, that your premiums will subsequently increase as you have dared to claim under your contract of insurance. This can create an ongoing cost that most people would rather avoid also –
It is a fact of life that most people live pay-cheque to pay-cheque and those whom don’t would by exhausting their funds expose themselves to significant future risk in the event of a downturn. Consequently, they are what the law calls ‘impecunious’ i.e. BROKE! Who in their right kind of mind would lend to someone whom can’t afford it up front? Well, there is only:
THE CREDIT HIRE COMPANY
So, the much maligned Credit Hire companies perform a vital service to society by filling a void that would not exist but for the duplicity of most major insurers, the short sightedness of some consumers and the fact most people are not overflowing with spare cash!
ACKNOWLEDGEMENT AND RESOURCES
We are not affiliated with any of the following but acknowledge their work which was considered in this article.
We would thank Counsel Sunny Virk of the Barristers Group Chambers whom very recently pointed out that the law of credit hire on the road was based on Shipping Law. This fundamental point is often missed and will be expanded upon in later articles. He has not seen this article or contributed to it and we would recommend you contact his clerk should you wish his advice.
We would also thank our friends at Keoghs whom have provided updated data on credit hire costs. These are not recorded by any central body and they have solely observed that in the space of 10 years, the cost has inflated by >143%. We are in no way affiliated with Keoghs save for that we act for and against their clients on instruction – by – instruction basis.
If your case has already gone to court and you feel that you have been a victim of misrepresentation by a hire company, you should contact the FCA and seek legal advice.
COMMENT
Judges, insurers and legal practitioners often have little to no sympathy for people whom sign agreements without reading and/or understanding them especially if the consumers themselves are sophisticated and/or self-employed individuals. But in 17 years of legal practice we have only ever met 2 judges with the adequate IT skills required to use a computer well, most law firms still use fax machines while refusing to accept service by e-mail and everyday I see barristers taking paper bundles to court when a pdf on a tablet is superior both in protecting client data and finding what you need. Simply put, beauty is in the eye of the beholder.
A driver whom takes out a credit hire agreement should not be embarrassed or ashamed that they did not appreciate the full extent of their liability at the outset. Equally, it is not foolish to trust a hire agreement which provides consumer contracts regulated by the FCA. These are complex agreements. The rules of the road in this case are based on shipping contracts. It is clear that there is an odious and obvious gap in the law as wide and as foreboding as the Bermuda Triangle!
Finally and despite popular opinion; solicitors, barristers and judges do not make the law. We interpret Parliaments intention as best as we can and advocates fight for their client. But until Parliament regulates otherwise; consumers should seek legal advice from solicitors (unless they own a credit hire company of course) and always remember: -
CAVEAT EMPTOR
(Buyer Beware)
HOW WE CAN HELP
Gavin Renwick Solicitor-Advocate has been dealing with credit hire claims since 2012 since serving time in Hill Dickinson LLP’s fraud department (merged into Keoghs). He has acted for and against major insurers, the largest credit hire and some of the more nefarious third party organisations. As of 2023 he has been regularly instructed to appear in the courts of London, Manchester, Leicester and other major centers by solicitors, insurers and credit hire companies. He has has successfully struck-out credit hire claims >£75’000, repeatedly recovered full credit hire charges of >£50’000 and draws on an extensive background of fraud ring investigations, commercial objectivity and adequate advocacy.
Should you require advice of legal representation or further information on any of the issues touched upon in this article – please do not hesitate to reach out
In terms of Appendix/bibliography:
[1] i.e. non-fault driver
[2] In almost all cases this will bein excess of the combined remaining awards i.e. Personal Injury, Repairs etc.
[3] The figures were compiled by Keoghs Solicitors. While we do accept instructions from Keoghs this on a case by case basis and we have no affiliation with them but from our own experience; it ‘looks about right.’
[4] Case of Donohue -v- Stevenson ([1932] AC 562, 1932 SC (HL) 31
[5] Overseas Tankship (UK) Ltd -v- Morts Dock and Engineering Co Ltd (the Wagon Mound No.1) [1961 AC 388). –
[6] The reader is reminded that everything preceding the word 'but' is almost meaningless.
