How Much Does a Credit Hire Car Cost—and Do You Pay Anything?

When you’re involved in a car accident that wasn’t your fault, you might hear about something called “credit hire”. But what exactly is it, and how does it work? More importantly, is credit hire a loan?

Understanding the financial and legal aspects of credit hire is essential for anyone involved in a non-fault accident in the UK. In this article, we’ll break down the concept, explore whether credit hire counts as a loan, and explain the implications of entering into a credit hire agreement.

What is Credit Hire?

Credit hire is the provision of a replacement vehicle to a non-fault driver after an accident. The cost of hiring the vehicle is not paid by the driver upfront but is instead claimed back from the at-fault driver’s insurance company at a later date. This allows the non-fault driver to remain mobile without financial burden while their car is being repaired or replaced.

In the UK, this is a common arrangement and has become a standard service offered by many accident management companies.

Credit Hire Explained: How It Works

When you’re involved in a non-fault accident:

1. 1. You contact a credit hire company.
      
   2. They deliver a replacement vehicle to you (often matched in class and type to your damaged vehicle).
      
   3. You sign a credit hire agreement.
      
   4. The hire charges are then claimed from the at-fault party’s insurance.
      

It’s important to note that although you’re not paying for the hire car upfront, you are still liable for the charges if the at-fault insurer refuses or fails to pay. This is where confusion arises about whether credit hire is a loan.

Is Credit Hire a Loan?

Technically, credit hire is not a loan in the traditional sense. You’re not borrowing money; instead, you’re receiving a service (a replacement vehicle), with a deferred payment agreement.

Key Differences Between Credit Hire and a Loan:

While the financial responsibility lies with the at-fault insurer, you – as the driver – remain contractually liable under UK law. This is why understanding credit hire agreements is critical.

The Legal Position in the UK

Under UK law, credit hire arrangements fall under the category of contractual agreements rather than regulated credit agreements (like bank loans).

The Consumer Credit Act 1974 governs regulated loans and credit agreements, but credit hire agreements are generally exempt because they are short-term and related to the provision of a service, not money lending.

Key UK Legal Principles:

• • Giles v Thompson [1993] – clarified issues around recoverability and assignment of claims.
    
  • Lagden v O’Connor [2003] UKHL 64 – established that impecunious claimants (those who cannot afford upfront car hire) can claim credit hire charges.
    
  • The ABI GTA (General Terms Agreement) provides standard practices for insurers and hire companies, helping reduce disputes.
    

Credit Hire and Insurance: Who Pays?

In an ideal world, the at-fault party’s insurer covers all credit hire costs. However, insurance companies often challenge:

• • The need for a replacement vehicle.
    
  • The duration of the hire.
    
  • The cost compared to standard market rates.
    
  • Whether the claimant was truly impecunious (unable to afford traditional car hire).
    

If the claim is disputed and taken to court, the credit hire company may pursue the case in your name. This is why some insurance policies may warn about potential liabilities in credit hire disputes.

Understanding Your Liability

Although you’re not paying upfront, you still sign a contractual agreement to repay the hire costs if the claim isn’t successful. So:

• If the at-fault driver admits liability, the process is usually smooth.
  
• If there’s a liability dispute, you may need to provide evidence (e.g., proof of income) to justify the need for credit hire.
  

This is why the Financial Conduct Authority (FCA) and legal professionals advise drivers to fully understand what they’re signing.

Financial Risks and Considerations

Here are some important points to keep in mind:

1. Impecuniosity

You must show you couldn’t afford to rent a vehicle privately. If you’re judged to be “pecunious,” the court might rule that you should have rented a cheaper car directly.

2. Daily Rates

Credit hire vehicles often cost more than typical rental rates due to the deferred payment model and risk involved.

3. Length of Hire

Insurers often dispute how long you kept the hire car, especially if you delayed repairs or purchasing a replacement.

4. Litigation Risk

If the insurer refuses to pay, and the hire company sues you (or sues in your name), you might become involved in legal proceedings.

Pros and Cons of Credit Hire

✅ Pros:

• • No upfront costs
    
  • Access to a like-for-like replacement car
    
  • Convenient service after a stressful accident
    
  • No loss of mobility
    

❌ Cons:

• • You’re legally liable if the at-fault insurer doesn’t pay
    
  • May be more expensive than standard rental
    
  • Complicated legal agreements
    
  • Possible court involvement
    

Alternatives to Credit Hire

If you’re unsure about credit hire, consider:

• • Claiming through your own insurer – If you have comprehensive cover, they may provide a courtesy car.
    
  • Hiring a car privately – If you can afford it and want to avoid legal complications.
    
  • Using public transport – If your vehicle isn’t essential for your daily routine.
    

Always consult with your insurer or a solicitor before agreeing to a credit hire contract, especially if liability for the accident is unclear.

Common Questions About Credit Hire

❓ Is credit hire free?

No. While you don’t pay upfront, you’re still responsible for the cost if it can’t be recovered from the other party’s insurer.

❓ Do I need to tell my insurer?

Yes. It’s advisable to notify your insurer before entering into any agreement involving a third-party hire car.

❓ What if the at-fault driver denies liability?

This may complicate matters. The credit hire company may go to court, and you could be required to provide statements or attend proceedings.

Conclusion: Is Credit Hire a Loan?

To sum up: credit hire is not a traditional loan, but it is a deferred payment agreement. You receive a car now and agree to pay later – typically through a claim made against the at-fault driver’s insurer.

However, because you remain contractually liable, you should treat a credit hire agreement seriously, as you would any financial commitment.

When used properly, credit hire car services can provide much-needed relief and mobility after an accident. But make sure you understand the terms, assess your risk, and if needed, seek legal advice to avoid financial surprises down the line.