The Role of Credit Hire in UK Car Insurance Claims

As an FCA-authorised expert with over 900,000 policies arranged, WeCovr provides this guide to credit hire in the UK motor insurance market. Navigating a claim can be complex, but understanding your rights to a replacement vehicle is crucial for getting back on the road with minimal disruption.

WeCovr explains credit hire vehicles and how they fit into the claims process

A car accident is always stressful, but the period that follows can be just as challenging. If your vehicle is off the road for repairs or has been written off, how do you continue with your daily life? This is where replacement vehicles come in, but not all are created equal. You may be offered a 'courtesy car' by your own insurer, or you might be entitled to a 'credit hire' vehicle.

Understanding the difference is vital. This comprehensive guide will explain the role of credit hire in UK car insurance claims, your entitlements as a non-fault driver, and the potential pitfalls to avoid.

Understanding UK Motor Insurance Fundamentals

Before diving into the claims process, it’s essential to grasp the basics of motor insurance in the UK. This foundation will help you understand how different policies respond after an accident.

Why Motor Insurance is a Legal Requirement

In the United Kingdom, it is a criminal offence to own or drive a vehicle on a road or in a public place without at least a basic level of motor insurance. This is mandated by the Road Traffic Act 1988. The core purpose of this law is to ensure that anyone who suffers injury or property damage caused by a driver has access to financial compensation.

According to the DVLA, there are over 40 million licensed vehicles on UK roads as of late 2024. Compulsory insurance provides a vital safety net for every road user, from pedestrians to HGV drivers.

The Three Main Levels of Car Insurance Cover

When you buy motor insurance, you choose a level of cover. Understanding what each level provides is key to managing your risk and your budget.

Business and Fleet Insurance Obligations

For businesses, the requirements are just as strict.

• Business Car Insurance: If you use your personal car for work beyond commuting (e.g., visiting clients), you need business use cover. Standard policies may not be valid for a business-related claim.
• Fleet Insurance: Businesses operating multiple vehicles (typically two or more) can insure them under a single fleet policy. This simplifies administration and can be more cost-effective. Fleet managers have a duty of care to ensure all vehicles are correctly insured and maintained, and that drivers are licensed and competent.

An expert broker like WeCovr can help businesses and fleet managers navigate these complex requirements, ensuring they have the correct commercial motor insurance UK policy to protect their assets and operations.

The Car Insurance Claims Process: A Step-by-Step Guide

Knowing what to do after an accident can make the claims process smoother and less stressful. This journey involves several key concepts that affect your policy and your pocket.

What Happens Immediately After an Accident?

1. Stop Safely: Stop your vehicle as soon as it is safe to do so. Turn off the engine and switch on your hazard lights.
2. Check for Injuries: Assess yourself, your passengers, and others involved for any injuries. Call 999 immediately if anyone is hurt or if the road is blocked.
3. Exchange Details: Under UK law, you must exchange details with the other party if there has been damage or injury. This includes:
   • Name and address
   • Vehicle registration number
   • Insurance company details
4. Do Not Admit Fault: Even if you think you are to blame, do not admit liability at the scene. Stick to the facts.
5. Gather Evidence: Use your phone to take photos of the scene, vehicle positions, and damage to all vehicles. Note the time, date, weather conditions, and any witness details.
6. Report to the Police: You must report the accident to the police within 24 hours if someone is injured or if the other driver fails to stop or exchange details.
7. Contact Your Insurer: Inform your insurance provider as soon as possible, even if you don't intend to make a claim. Your policy document will specify the timeframe for this.

Key Insurance Concepts in a Claim

• No-Claims Bonus (NCB) / No-Claims Discount (NCD): This is a discount on your premium for each year you go without making a claim. A fault claim will typically reduce your NCB (e.g., from 5 years down to 3) or remove it entirely, leading to higher premiums at renewal. If you are not at fault, your NCB should be unaffected, as your insurer will recover their costs from the at-fault party's insurer.
• Excess: This is the fixed amount you must contribute towards the cost of a claim. For example, if your excess is £300 and the repair bill is £1,500, you pay the first £300 and your insurer pays the remaining £1,200. If you are not at fault, you can usually reclaim your excess from the other driver's insurer.
• Optional Extras: These are add-ons to your policy. Common extras include:
  • Legal Expenses Cover: Helps you recover uninsured losses (like your excess, loss of earnings, or personal injury compensation) from the at-fault party. This is particularly relevant to credit hire.
  • Guaranteed Courtesy Car: Enhances the standard courtesy car provision, often guaranteeing a car for the full duration of repairs, not just a limited period.
  • Breakdown Cover: Provides roadside assistance if your vehicle breaks down.

What Exactly is a Credit Hire Vehicle?

This is where many drivers become confused. After a non-fault accident, you need a replacement car. You might get a "courtesy car" from the garage repairing your vehicle, or you might be offered a "credit hire" vehicle. They are not the same thing.

A credit hire vehicle is a temporary replacement vehicle supplied by a specialist Credit Hire Organisation (CHO) to the non-fault driver after an accident. The key feature is that it is provided on a credit basis. This means you do not pay for the hire upfront. The CHO pays for it and then seeks to recover the hire charges directly from the at-fault driver's insurance company on your behalf.

According to the Association of British Insurers (ABI), the cost of providing replacement cars (including credit hire) is a significant component of the £9.9 billion paid out in motor claims in 2023. This underscores how common and integral they are to the claims ecosystem.

Credit Hire vs. Courtesy Car: The Key Differences

Understanding the distinction is crucial, as your entitlement and the process for each are very different.

How the Credit Hire Process Works: A Step-by-Step Breakdown

If you've been in a non-fault accident, you may be contacted by a CHO. Here is the typical journey.

1. The Initial Contact and Assessment

After your accident, you might be referred to a CHO by your insurer, broker, repairer, or a solicitor from your legal expenses policy. The CHO will first assess your case to confirm:

• Liability: Is the other driver clearly at fault? They need to be confident they can recover the costs.
• Need: Do you have a genuine need for a replacement vehicle? We'll explore this critical point later.

2. Signing the Credit Hire Agreement

If you proceed, you will be asked to sign a legally binding credit hire agreement. This document is crucial. It will state:

• The daily hire rate for the vehicle.
• That the CHO is providing the car on credit.
• That you agree to assist the CHO in recovering the charges from the at-fault insurer.
• That you may be potentially liable for the costs if the CHO cannot recover them (for example, if you mislead them or fail to cooperate).

It is vital to read this document carefully. By signing, you are authorising the CHO to pursue the at-fault insurer for payment.

3. Receiving and Using the Hire Vehicle

The CHO will arrange for a replacement vehicle to be delivered to you. A key principle in credit hire is that the vehicle should be a reasonable equivalent to your own.

• If you drive a seven-seater MPV for your large family, you should be provided with a similar-sized vehicle, not a small city car.
• If you drive a prestige vehicle for business purposes, you may be entitled to a vehicle of a similar standard.
• If you drive an electric vehicle (EV), the CHO should aim to provide a comparable EV, particularly if you rely on home charging.

You can use this vehicle for the entire time you are deprived of your own car – this is known as the "period of hire".

4. The Cost Recovery (Subrogation) Process

This is the final and most important stage. The CHO will present an invoice for the total hire cost to the at-fault driver's insurance company. This process is known as subrogation, where one party (the CHO) takes on the legal right of another (you) to pursue a claim against a third party.

In most straightforward cases, the at-fault insurer will pay the bill, and the matter is closed. However, disputes can and do arise.

Potential Disputes and How to Avoid Them

While credit hire is a legitimate and necessary service, the at-fault insurer is entitled to scrutinise the claim to ensure the costs are reasonable. This can lead to disputes, which usually centre on three key areas.

1. The Claimant's "Need" for a Replacement Vehicle

The at-fault insurer will only pay for hire charges if the claimant had a genuine need for a replacement vehicle. If they believe you didn't, they can refuse to pay.

• Example of Need: You are a parent with one family car used for the school run, shopping, and commuting. Your need is clear.
• Example of Potential Dispute: You own a second car that was available for you to use during the repair period. The at-fault insurer could argue you had no need for a hire car and refuse to pay the claim. This is known as impecuniosity – the question of whether you could have afforded to rent a car yourself and claim the costs back later.

2. The Daily Hire Rate (The Cost of Hire)

At-fault insurers will often challenge the daily rate charged by the CHO. They argue that CHO rates are higher than the rates you would pay if you walked into a standard high street rental company (like Hertz or Enterprise). These lower rates are known as Basic Hire Rates (BHR).

• The Law: The courts have established that a CHO is entitled to charge a reasonable rate that reflects the additional services they provide (delivering the car, handling the credit element, managing the claim).
• The General Terms of Agreement (GTA): To reduce these disputes, the ABI and a large number of CHOs and insurers have signed up to the GTA. This is a framework that sets out agreed processes and standardised rates for different vehicle groups, helping to ensure costs are managed and disputes are minimised. If both the CHO and the at-fault insurer are subscribers to the GTA, the process is usually much smoother.

3. The Period of Hire (The Length of Hire)

The hire period should only last for as long as is reasonably necessary. You, the claimant, have a duty to mitigate your loss. This means you must take reasonable steps to keep the hire period (and therefore the costs) to a minimum.

Disputes can arise if there are delays, for example:

• If you delay in giving the garage authority to start repairs.
• If there are unreasonable delays in the repair process itself.
• If you delay in accepting a settlement offer for a vehicle that has been written off.

In such cases, the at-fault insurer might agree to pay for part of the hire period but refuse to cover the period of the delay.

WeCovr's Expert Guidance on Navigating Your Claim

Having the right motor insurance policy from the outset is your first line of defence. An inadequate policy can leave you exposed and out of pocket.

As an FCA-authorised insurance broker, WeCovr specialises in helping UK drivers, businesses, and fleet managers find the best car insurance provider for their specific needs. We compare policies from a wide panel of insurers to find cover that offers not just a competitive price, but also the features you need.

A comprehensive policy with Legal Expenses Cover is highly recommended. This add-on provides access to legal experts who can help you pursue a credit hire claim and recover other uninsured losses, ensuring you are not disadvantaged after a non-fault accident. We can also help you find policies with enhanced Guaranteed Courtesy Car cover, providing another layer of protection. With high customer satisfaction ratings, our team is here to provide clarity and support at no extra cost to you.

Credit Hire Considerations for Business and Fleet Managers

For a business, vehicle downtime is not just an inconvenience; it's a direct hit to revenue and productivity.

• Business Continuity: A sales executive without a car cannot visit clients. A delivery driver without a van cannot make deliveries. Credit hire can be a lifeline, providing a like-for-like commercial vehicle to keep operations running smoothly.
• Specialist Vehicles: Many fleets contain specialist vehicles (e.g., refrigerated vans, Luton vans with tail lifts, modified vehicles for tradespeople). A standard courtesy car is simply not a viable replacement. A specialist CHO can often source appropriate vehicles, which is critical for mitigating business losses.
• Fleet Management Strategy: Fleet managers should have a clear post-accident procedure. This includes educating drivers on what to do at the scene and having a clear process for initiating repairs and arranging replacement vehicles. A robust fleet insurance policy, arranged through an expert broker, is the cornerstone of this strategy.

Frequently Asked Questions about Credit Hire and Car Insurance

Q1: Am I liable for credit hire costs if the at-fault insurer refuses to pay?

Potentially, yes. When you sign the credit hire agreement, you are the one hiring the car. The CHO is pursuing the costs on your behalf. If you have been truthful and have cooperated fully (e.g., by providing documents or attending court if required), the CHO will typically have its own insurance in place to cover its losses. However, if you have misled the CHO or failed to cooperate, you could be held liable for the full hire cost.

Q2: What's the main difference between a courtesy car and a credit hire car?

The main differences are who provides it, who is eligible, and the type of vehicle you receive. A courtesy car is a benefit of your own comprehensive policy, usually a small standard car, and is only available if your vehicle is repairable. A credit hire car is for the non-fault party, provided on credit by a specialist company, and is typically a like-for-like replacement available for the full period you are without your car.

Q3: Can I get a credit hire vehicle if I only have third-party insurance?

Yes. Your entitlement to a credit hire vehicle is based on you being the non-fault party in an accident, not the level of cover you have. Since the cost is claimed from the at-fault driver's insurance, your own policy type doesn't prevent you from making a claim for a replacement vehicle and other losses.

Q4: How long can I keep a credit hire vehicle for?

You can keep the credit hire vehicle for the reasonable period of time that you are deprived of the use of your own vehicle. This typically means from the date of the accident until your own vehicle is fully repaired and returned to you, or until you receive a settlement cheque if your vehicle is a total loss (write-off), allowing you reasonable time to purchase a replacement. You must act to keep this period as short as possible to mitigate your losses.

Ready to review your motor insurance to ensure you have the right protection?

The team at WeCovr are experts in private, business, and fleet insurance. We'll compare policies from leading UK insurers to find you the right cover at a competitive price, completely free of charge. We can even help you find discounts on other policies when you purchase motor cover.

Contact WeCovr today for your free, no-obligation motor insurance quote and drive with confidence.