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Credit Hire Tutorial

Is it reasonable for a claimant to enter into a credit hire agreement if he has been offered an equivalent vehicle free of charge, when will spot hire rates apply (i.e. hire costs without any additional charges for providing the vehicle on credit) and how are ‘spot hire' rates assessed?

Case Law:

  • Copley v Lawn & Others (2009) – refusing defendant's offer of a ‘free' car will not destroy claim for credit hire

  • Dimond v Lovell (2000) – a claimant cannot recover additional charges for the hirer providing the vehicle on credit

  • Lagden v O'Connor (2003) – where a claimant is unable to pay hire charges, i.e. they are impecunious, they can recover additional charges for the hirer providing the vehicle on credit.


The answer will depend on who makes the offer.

If the offer is made by the claimant's own insurer then the claimant can normally recover the cost of hire as the Courts have tended more recently to favour the argument that benefits acquired under an insurance policy should not be taken into account in assessing loss or mitigation.

The position is similar if the offer is made by the defendant's insurer, although there are some differences. In the recent case of Copley v Lawn & Others (2009) the Court of Appeal recognised that defendant insurers were not in fact offering a "free” car, but instead they were paying for a hire vehicle with the cost being hidden from the claimant. In reality the offer is to find and then pay for a hire vehicle and unless the claimant, or their advisor, is aware of what hire charges the defendant's insurer is able to secure, then they are unable to compare the vehicle being offered against one the claimant can arrange.

It was therefore concluded that:

  1. It is not unreasonable for a claimant to reject or ignore an offer of a replacement vehicle from a defendant (or their insurer) which does not make clear the cost of hire to the defendant for the purpose of enabling the claimant to make a realistic comparison with the cost they have, or will incur, when arranging a replacement vehicle through a credit hire provider.

  2. Following Strutt v Whitnell (1975) , if a claimant does unreasonably reject or ignore a defendant's offer of a replacement car, the claimant is entitled to recover at least the cost which the defendant can show he would reasonably have incurred, i.e. he does not forfeit his damages claim altogether.

To that extent, the general rule that the claimant can recover the ‘spot' or market rate of hire for his loss of use claim was upheld, unless and to the extent that a defendant can show that a car could have been provided by them at a cheaper rate.

Credit hire companies include within their credit hire charges, additional charges for the credit and the litigation services they provide. However following Dimond v Lovell (2000) a claimant is only entitled to recover the ‘spot' hire rate, i.e. the rate it would have cost the claimant to hire a vehicle in their locality under an ordinary hire agreement.

The exception to this is where the claimant does not have the personal means to make immediate payment for a hire car ( Lagden v O'Connor (2003) ). But how is the claimant's impecuniosity decided? In Lagden, Lord Nichols said that it was where "there was an inability to pay hire charges without making sacrifices [a claimant] could not be expected to make”. Lord Hope however suggested that impecuniosity was where payment up front would be an unreasonable burden; and in his view the possession of a credit or debit card would suggest that someone was not impecunious as this would give them the ability to pay without a credit hire agreement.

And how are ‘spot hire' rates assessed?

In practice, it seems that judges tend to favour the ‘reasonable sacrifices' test, although the possession of a credit card will often be explored by a defendant.

Defendant's often rely on reports from Autofocus which attempt to establish spot hire rates local to the claimant. The burden of showing whether or not a rate is reasonable is on the defendant but in practice the claimant will have to rebut Autofocus by showing local rates that are higher than those quoted.

The length of hire may also be challenged, as the claimant can obviously only recover the cost of hiring a vehicle for as long as is reasonably necessary. In most cases 2 to 4 weeks is considered reasonable, dependent on how long the claimant's vehicle is off the road, and if the hire lasts longer then this will have to be justified.

Another challenge might be to question whether there was a need for a hire vehicle at all, e.g. if the claimant is on holiday or if his injuries prevented him from driving (watch what the medical report says on this) then it may be difficult to justify hiring a replacement vehicle. In addition, if the claimant owns a second car that could have been used, it is likely the claimant will need show that an additional hire car was required.

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