Regrettably, you have been involved in a road accident and your car is damaged.

Depending upon the extent of the damage, it will be either be capable of repair or it will be deemed a write off.

In most cases, most people in this situation will need an alternative car to enable them to carry on with their daily routine.

This very common scenario, occurring thousands of times per week across the country, immediately generates options.

If you have comprehensive insurance and the car is repairable, most insurers will offer you the use of a courtesy car to drive around in; they will take care of the repairs and will swap back your car for the courtesy car once the repairs are complete.

If you are responsible for the cause of the accident, this is a crucial lifeline.

Other alternatives if you are at fault for the accident include making adjustments to your life, maybe working from home to avoid the commute, taking public transport, seeing if you can borrow a family member’s or friend’s car pending repairs.

These other alternatives are brought into sharp focus if a courtesy car is not on offer, either because your car is a write off or because you only have third party as oppose to comprehensive cover.

Where things get decidedly more problematic, is when the accident is not your fault; or, at least, in your opinion, the other driver is to blame for its cause. Of course, the other driver may not be in agreement with this.

What are the options then?

Well, as before, if you have comprehensive insurance and your car is repairable, your insurance company will provide a courtesy car as already mentioned. Your insurer will endeavour to recover the repair costs and courtesy car costs from the other driver’s insurer.

Where it is clear that the other driver is to blame for the cause of the accident, this is generally not a problem. If the other driver disputes he/she is at fault, then funny things can happen. Insurance companies talk to each other and might make arrangements to settle their own respective vehicle repair and courtesy car costs.

You do not want this to happen. If you have a solicitor acting for your, especially if you are claiming damages for injuries caused in the accident, your solicitor will liaise with your insurer and ask them not to make any agreements with the other insurer or do anything which might prejudice the claim pending the solicitor carrying out further work which may well involve a court case to determine liability for the crash.

If you do not have comprehensive insurance, the car is a write off or you simply do not want to go through your insurer for fear of having a fault claim hanging over your policy, what are the options then?

As before, is there another car available to you from friends or family you could use or would relying on public transport for a short time be a possibility? These options should be considered in every applicable case.

However, we turn to another obvious option – you reach the decision that you will hire a car instead.

This is where we get down to the nitty gritty of this article.

There are two main ways to hire a car:

  1. You go online or rock up at the offices of a car hire company – Hertz, Avis, Enterprise etc and enter into a contract for the hire of a car. You will agree on the make and model of the car to be hired, the length of hire, and other terms of business such as insurance cover/excess and what-is-called Collision Damage Waiver. The main thing though is that you will be paying for the car on a pay-as-you- go basis. You will have to present a debit or credit card and those details will be held by the hire company for the duration of the hire. The hire companies charge commercial rates – of course they do – they are not charities and these rates are known a Basic Hire Rates and are commonly called ‘spot rates ‘.
  2. You hire a car on a credit hire terms. This is where the fun and games start. When you hire on credit terms, the rates are significantly greater than spot rates. There are a number of reasons for this; the main one being that the credit hire company is not being paid during the period of hire. Even though the hirer remains liable for the hire charges, the credit hire company has a major headache in trying to recover charges from someone who simply does not have the money to give.

If a car is hired on credit terms, the total amount of the invoice at the end of the hire period can be horrendously high. If the accident was not your fault, you will be expected to claim the amount of the invoice from the other driver and, when i say ‘ other driver ‘, i mean his/her insurance company. and, guess what?, insurance companies do not like paying out on big hire claims.

The result has been a lot of cases on how credit hire should work, what is recoverable, in what circumstances etc etc. It all started in the early 1990s when a remarkable thing happened – the defending insurance company said that they should not be liable for any credit hire charges because the Agreement was champertous. At that point, solicitors and barristers said ‘ whoa easy tiger, hold fire ‘ and we all promptly dug out our legal dictionaries to find out what champertous meant. It didn’t matter because the Court decided that the Agreement wasn’t champertous – you can look it up if you must.

At this point, i make one observation:-

I frequently read legal articles and see jobs advertised which describe credit hire law as complicated or complex. I disagree. Credit hire agreements cause lots of disputes and arguments but, in my humble opinion, it is not the law which is complicated, it it those participating in the law which causes the problems.

The law is relatively straight forward. I am aware that to 99% of the general public is dry, remote and sterile. However, here goes:

The person hiring the car is the person bring the claim ( the Claimant ) for the recovery of the charges and the person who brings a claim is the person who has to prove it.

As with all claims, the amounts claimed have to be reasonably incurred in the first place and reasonable in amount.

So the Claimant will have to show that they have considered the options open to someone who is suddenly without a car owing to a road accident.

The credit hire company should ask the person if they need a car in the first place. Really, they should ascertain the financial position of the person wanting to hire a car BEFORE hire starts for two reasons:

  1. a) if it turns out that the would-be hirer is wealthy and could afford to hire a car on ‘spot rates’ , then that is all they can recover from the Defendant.
  2. b) if it turns out the would-be hirer is not wealthy and, in fact, could be borderline destitute, if the claim is lost, would the credit hire company realistically recover their charges from him/her? Probably not.

So, for both reasons, it is within the interests of the credit hire company to check this out from the get-go.

The problem is that they often either do not bother to ask about the hirer’s financial position at all or carry out a completely inadequate enquiry.

When these cases end up in court, the Claimant hirer will be ordered to disclose his/her bank statements for all accounts including accounts for their spouse or partner, pay slips, tax returns etc. Anyone acting as a solicitor for the Claimant will be familiar with receiving a 12 page Defence. The first page will deal with the accident itself and the other 11 pages will basically be slagging off the credit hire bill. Solicitors acting for Defendant want to know everything – the full financial picture for the household, inside leg measurements and whether the Claimant likes cupcakes. Well maybe not the last two but you know what i mean.

Everything has to stack up – are there debits for what you expect mortgage/rent, gas, electric, water, council tax, tv licence, supermarket shopping etc? Is the income coming in as expected – regular credits for wages, Child Benefit, Working Tax Credit where applicable.

The problem is that some Claimants are less than forthcoming about their financial position and this causes major issues. Believe me, Defendant’s solicitors will carry out all sorts of checks and will be scream ‘ fundamental dishonesty ‘ if they think that anything other than full financial closure has been made. It is a particular problem for self- employed Claimants who might be legitimately reducing their net income declaration to HMRC so their Income Tax liability is as reduced as it is legally possibly to be.

‘ Fundamental dishonesty ‘, by the way, has a legal definition and is outside the scope of this article. Needless to say, you really do not want to be on the end of a Fundamental Dishonesty finding.

In a more recent separate development, there has been a law case affecting self-employed drivers, not least taxi drivers. In a nutshell, the law now says that their claim for car hire charges is not allowed. Instead, they should remain off work and claim loss of earnings/profits instead. Only if they are especially poor with no savings or if they can show that, if they did not work, they would lose their job, can they claim the car hire charges.

Defendants will scrutinise taxi driver tax returns/trading accounts. They will know what a taxi driver would be expected to earn and will be very suspicious of earnings under-declared for tax reasons. Never forget that MOT histories are available online. A taxi vehicle travelling 35,000 miles per year will be expected to produce earnings to match and, if they do not, there are bound to be questions.

Broadly speaking, however, as long as everything is above board , need for hire is made out, alternatives considered, the financials stack up, and the credit hire agreement is legally sound, there is nothing wrong with hiring a car and on credit terms if money does not enable spot rates to be paid.

Since the early 1990s the law has added a few oohs and aahs to the mix but the basics remain.

Given the financial savings to be made by Defendant’s motor insurance companies challenging credit hire bills and, maybe, getting a Fundamental Dishonesty allegation to stick, do not expect the legal seas to be calmed any time soon.

Leave a Reply