Credit Hire Explained: Essential Information for Taxi Drivers

Running a taxi business in the UK is already challenging enough with fuel costs, insurance, licensing, and vehicle maintenance. But what happens if your taxi is damaged in an accident that was not your fault? Losing your vehicle means losing your income. This is where credit hire services play a crucial role.

Credit hire allows taxi drivers to continue working while their own vehicle is being repaired or replaced. It provides a temporary replacement vehicle on a credit basis, meaning the driver does not need to pay upfront. Instead, the cost is recovered later from the at-fault driver’s insurer.

In this article, we will explore everything taxi drivers need to know about credit hire services in the UK, including how they work, the legal background, benefits, challenges, and key things to watch out for.

What is Credit Hire?

Credit hire is a legal arrangement where a driver who is not at fault in an accident can access a replacement vehicle without paying immediately. The hire company provides the vehicle and then pursues the cost from the insurer of the at-fault driver.

For taxi drivers, credit hire is especially important because their vehicle is not just for personal use—it is their source of livelihood. If the car is off the road for even a few days, it can mean a significant loss of earnings.

Why Taxi Drivers Rely on Credit Hire

Unlike ordinary motorists, taxi drivers depend on their vehicles to generate daily income. Being involved in an accident creates two problems:

• • Loss of Vehicle – They cannot continue operating without a licensed taxi or private hire vehicle.
  • Loss of Earnings – Every day off the road is a financial setback.

Credit hire helps solve these issues by:

• • Providing a like-for-like replacement vehicle, such as a licensed taxi, black cab, or private hire car.
  • Covering the driver’s ability to keep earning while their own car is being repaired.
  • Ensuring no upfront costs for the driver, since payments are recovered later from the responsible insurer.

The Legal Position in the UK

Credit hire arrangements are recognised under UK law. The principle comes from the idea that if someone is involved in an accident that was not their fault, they should not suffer financially.

Courts in the UK have ruled that:

• • An innocent party is entitled to be put back into the position they would have been in had the accident not happened.
  • For taxi drivers, this means they are entitled not just to a replacement vehicle, but also to specialist vehicles that allow them to continue working.
  • The cost of hiring such a replacement is recoverable from the at-fault party’s insurer, provided it is reasonable and necessary.

However, taxi drivers must also show that they genuinely needed the replacement vehicle and could not afford to hire one themselves without credit hire. This is why companies usually check income and financial background before providing a car.

How the Process Works

1. 1. Accident Occurs – The taxi driver is involved in a non-fault accident.
   2. Contact Credit Hire Company – The driver contacts a company that provides credit hire services.
   3. Vehicle Assessment – The company checks whether the accident was genuinely not the driver’s fault and assesses the need for a replacement.
   4. Provision of Replacement Vehicle – A licensed taxi or private hire car is provided quickly, often within 24 hours.
   5. Repairs or Settlement – The driver’s vehicle is repaired or written off.
   6. Recovery of Costs – The credit hire company then claims the hire charges from the at-fault driver’s insurer.

Types of Replacement Vehicles for Taxi Drivers

Not every replacement car will be suitable for a taxi driver. The law recognises this and allows for like-for-like replacements, which may include:

• • Hackney Carriages (Black Cabs) – For drivers who operate public hire vehicles.
  • Private Hire Vehicles (PHVs) – For Uber drivers, minicab operators, or local hire services.
  • Specialist Vehicles – Such as MPVs or adapted taxis for wheelchair passengers.

This ensures the driver can continue providing the same level of service and earning income.

Benefits of Credit Hire for Taxi Drivers

1. 1. No Upfront Costs – Taxi drivers do not have to pay for the replacement vehicle out of their own pocket.
   2. Business Continuity – Keeps drivers on the road and earning while their car is unavailable.
   3. Legal Protection – Costs are usually recovered through established legal processes from the at-fault insurer.
   4. Like-for-Like Vehicle – Ensures the replacement meets taxi licensing requirements.
   5. No Loss of Earnings – Prevents long gaps in income that can affect financial stability.

Potential Challenges and Risks

While credit hire is a lifeline for many taxi drivers, there are some challenges to be aware of:

1. Disputes Over Hire Charges

Insurance companies often challenge the cost of credit hire vehicles, claiming they are higher than standard rental rates. This can lead to disputes or delays in settlement.

2. Proof of Need

Drivers may be asked to prove that they genuinely needed credit hire and could not fund a replacement vehicle themselves. If they cannot, insurers may refuse to pay the full amount.

3. Duration of Hire

The length of time the replacement vehicle is hired must be reasonable. Prolonged hire periods may not always be recoverable.

4. Legal Proceedings

If the at-fault insurer refuses to pay, the case may need to go to court. While this does not usually affect the driver directly, it can delay final settlement.

Responsibilities of Taxi Drivers in Credit Hire

To ensure their claim is valid, taxi drivers should:

1. 1. Be Honest About Income and Finances – The company may check if the driver could afford to hire a car without credit.
   2. Keep Records – Maintain proof of bookings, income, and the need for the vehicle during the hire period.
   3. Avoid Misuse – Use the replacement vehicle strictly for taxi or private hire purposes.
   4. Communicate Promptly – Inform the hire company as soon as the own vehicle is repaired or a settlement is reached.

Key Legal Principles That Support Taxi Drivers

1. 1. Mitigation of Loss – Drivers must act reasonably to reduce losses. For example, they cannot claim for an unnecessarily expensive vehicle.
   2. Reasonable Necessity – The replacement vehicle must be necessary for earning a living, not just for convenience.
   3. Duty of Disclosure – Taxi drivers must disclose financial circumstances if questioned by insurers or in court.

Choosing the Right Credit Hire Company

Not all credit hire companies are the same. Taxi drivers should look for:

• • Specialist Taxi Replacement Services – Companies that understand taxi licensing rules.
  • Quick Response Times – Replacement vehicles provided within 24–48 hours.
  • Transparent Contracts – Clear terms about repayment if the claim is unsuccessful.
  • Legal Support – Access to solicitors if insurers refuse to pay.

Conclusion

For taxi drivers in the UK, credit hire is not just a convenience—it is often a necessity. When an accident takes a vehicle off the road, it threatens both transport and livelihood. Credit hire services ensure that drivers can continue earning without the burden of upfront costs.

However, taxi drivers should understand their responsibilities, the legal framework, and potential risks. Choosing a reputable credit hire company that specialises in taxi replacement can make the process smooth and stress-free.

Ultimately, UK law supports the principle that an innocent party should not suffer financially due to another person’s negligence. Credit hire for taxi drivers is a practical way of ensuring that principle is upheld.