What is credit hire?

Following a road traffic accident, a Credit Hire Organisation (CHO) may offer to provide the non-fault motorist with a replacement vehicle for the period they are without their own. A replacement vehicle will be provided in situations where the motorist's own vehicle is: (i) being repaired (ii) declared non-roadworthy due to the damage caused by the accident; or (iii) declared a total loss, meaning the damage is not economical to repair.

The replacement vehicle is provided to a motorist on a credit hire basis if they are unable to finance their own replacement vehicle or do not have access to appropriate alternative means of transportation. Generally, the vehicle provided is 'like-for-like', meaning it is as similar to the motorist's own vehicle as possible.

Before the hire can commence, the motorist must sign a credit hire agreement, a contract between the motorist and the CHO which regulates the hire. The credit hire vehicle is provided to the motorist ("hirer") on a fixed daily rate, which is calculated depending on the value, make, model and specification of the replacement vehicle. Throughout the hire period, the replacement vehicle is funded by the CHO, who can seek to recover the costs from the at-fault party, or their insurer, when the hire ends.

The hire agreement remains in place until such time as the hirer returns the replacement vehicle. The replacement vehicle should be returned: (i) when the hirer's own vehicle is repaired; (ii) if the hirer no longer requires the vehicle; or (iii) in instances where the hirer's own vehicle was declared non-roadworthy, when they receive settlement of the pre-accident value of their own vehicle from the at-fault insurer.

When the period of hire ends, the CHO sends an invoice for the hire charges to the at-fault party's insurer.

What happens if the at-fault insurer refuses to pay?

Should the at-fault insurer refuse to pay the hire charges, it may be necessary for the CHO to instruct solicitors to raise a court action in order to recover the outstanding credit hire charges.

For an overview of circumstances when the at-fault insurer might refuse to pay hire charges, see my colleague's blog (https://brodies.com/insights/insurance-and-risk/wh...).

When the claim is passed to them, the solicitor will usually contact the at-fault insurer to determine why there has been a refusal to pay and to find out if settlement can be achieved without court proceedings. If the at-fault insurer does not engage with the solicitor or again refuses to pay the outstanding invoice, then a court action might follow in the hirer's name.

Before raising a court action, the solicitor will contact the hirer to obtain any further information they need about the accident, to advise the hirer of the possibility of court proceedings being raised in their name and what that means. This is an opportunity for the hirer to ask questions about the process and to let the solicitor know if they suffered any other losses as a result of the accident.


Laura McMillan

Partner & Director of Advocacy

Hannah McMurray

Trainee Solicitor