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Credit hire is overrated

11 May 2010

The dubious world of credit hire revolves around capturing no fault drivers who need to hire vehicles following road traffic collisions. Customers are charged a premium for the buy now, pay later service - which can include over a 100 mark-up on normal car hire rates. They are advised that the inflated charges will be recovered from the liable third party driver.

The line of reasoning adopted in the House of Lords case of Lagdon -v- OConnor [2003] was that no reasonable person would hire a vehicle on credit, unless they had no other choice. The courts will now only award credit hire damages if claimants can prove they were short of money.

It is perhaps surprising that credit hire also extends to prestige cars. Given that high value vehicles tend to be owned by wealthy individuals and organisations, it seems unlikely that prestige customers will be in a position where they have no alternative but to credit hire. The courts are therefore routinely vexed with the question of how to assess the spot-hire rates. With prestige vehicles, assessment is complicated because of the niche nature of the market.

Two recent prestige car hire cases have provided some helpful guidance on the issue:

Darren Bent -v- Allianz Insurance Plc [2010] EWCA Civ 292

Lord Justice Jacob concluded on the question of credit hire assessment: "Working with comparables and making adjustments is the daily diet of judges concerned with valuation in all sorts of fields. Clearly evidence of the spot rate a year or so later than the relevant date is likely to throw considerable light on what the spot rate would have been at the time. I would add further that one must not be hypnotised by any supposed need to find an exact spot rate for an almost exactly comparable car."

Sharon Preece -v- Chaucer Insurance Services Ltd & Anor [2010]

In a recent matter before His Honour Judge Maxwell, sitting in Walsall County Court, Accident Exchange Ltd sought to argue a downward trend in credit hire charges to justify the award of an increase in the assessment of spot-hire rates. HHJ Maxwell sensibly declined the point and, taking into account RPI, reduced the 116 inflated daily hire rate from £342.43 to £158.12.

Chaucer Insurance, represented by Browne Jacobson and their in-house team of barristers at trial, received repayment of 36 of their pre-issue interim payment together with interest at 8 and costs of the entire action awarded in their favour.

In both cases, the courts allowed the use of broadly comparable evidence from a later date to be retrospectively applied to the date of hire. Defendants are no longer required to prove that an exact vehicle make and model would have been available to a claimant at the time of hire.

We recommend always requiring credit hire customers to show that they were lacking money and providing spot-hire rates evidence to challenge overrated credit hire charges.

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