Should I get a courtesy car through a credit hire company?

This fact sheet is for information only. It is recommended that you get legal advice about your situation.This fact sheet focuses on situations where you are considering entering into or have entered into a rental agreement with a credit hire company that provides cars to not at-fault drivers.

Case study

Liam had a car accident where he was not at fault. His car was badly damaged and needed extensive repairs. He was worried about what he would do without a car for the next month while his car was getting repaired! Liam found out about a service where he could get a “free” car while his car was getting repaired. He arranged to get a car from CREDIT HIRE COMPANY and signed some papers from CREDIT HIRE COMPANY without taking a close look at them. Liam was shocked when a few months’ later, CREDIT HIRE COMPANY told him they were going to start legal proceedings in his name against the other driver and if he didn’t cooperate, he would be liable for the full hire charges!

What is credit hire?

Credit hire companies offer a “courtesy car” to not at-fault drivers while their car is being repaired. The car is provided at no up-front cost and is essentially being provided to the not at-fault party on credit. These companies typically agree to pursue the at-fault driver or their insurance company to recover the hire car costs.

However, be aware that there are some risks involved in getting a courtesy car from credit hire companies.  Sometimes, these types of arrangements can be advertised on the basis that the car being provided is “free” to you, as the not at-fault driver, or that you are not required to take any steps to recover the hire car costs. However, this is likely to be an over-simplification so it is important to check what the actual position is!

When you are deciding whether to sign up for a courtesy car, you should carefully read the agreement to understand the conditions, requirements and limitations of the service being provided. In particular, watch out for:

  1. What the company is authorised to do on your behalf: You may be authorising the credit hire company to:
    • communicate on your behalf with the other driver and/or their insurer;
    • instruct lawyers on your behalf;
    • sign documents on your behalf; and
    • commence legal proceedings in your name.
  1. Your obligations as the hirer: You may be surprised by how extensive your obligations are under the agreement. You may need to assist the credit hire company, including by providing witness statements and other relevant documents, and attending court to give evidence as a witness. If you do not cooperate, the credit hire company may be able to chase you for all the hire car costs.
  2. Will you need to pay for any of the hire car costs? If the credit hire company cannot recover the hire car costs from the other driver for whatever reason (for example, because the other driver cannot be located) or their insurer (for example, because the insurer declined the driver’s insurance claim), you may be on the hook for these costs.
  3. What do you need to pay if there is damage to the hire car or someone else’s car/property when using the hire car: You must check the wording of the agreement
  4. What happens if the credit hire company wants to go to court? If the other driver or their insurer refuse to pay the hire car costs, the credit hire company may want to take them to court.  Typically, your contract allows them to do so in your name, and requires you to cooperate (eg. by giving evidence).

If the credit hire company is unsuccessful in the legal proceedings, the court may order you to pay the other side’s legal costs (since the proceedings are in your name). These legal costs can be extensive, particularly if the other side is an insurer.

WARNING: Check the agreement or with the credit hire company to see whether you would be indemnified from (i.e. protected from) any costs order made against you in any unsuccessful legal proceedings.

You should also check whether you would ultimately have to pay the hire car costs if the credit hire company can’t get all back from the other party or their insurer.  For instance, you are generally entitled to the cost of a hire car which is adequate for your needs (ie. it is not automatically a car of similar value or type to your damaged vehicle).  So if the court decides the hire car costs were excessive, will you be left out of pocket for this extra cost?

Sometimes a credit hire company may charge more than the daily market rates for a particular car.  This may be because they provide an additional service to you of chasing the at fault party for those hire costs.  If they cannot recover this higher rate from the other party, could you end up having to pay the difference?

  1. What happens if you need to go to court too? If you are not at fault in an accident, you may have other losses you want to chase the other driver or their insurer for – such as repair costs, towing costs, lost wages (for income-earning cars).  For further details, please see the I’ve had a car accident and I’m uninsured! fact sheet.

Generally, you cannot split a cause of action in order to bring a series of court actions about the same matter. Practically speaking, this means that your credit hire company usually cannot sue a party for the costs of renting a car (while your car is being repaired) and, in separate court proceedings, you sue for the cost of repairs to the car.

There is a risk, therefore, that if the credit hire company gets a judgment that the other driver or their insurer must pay your hire car costs, this may prevent you from commencing legal proceedings later on against the at-fault driver or their insurer to recover your repair costs (if you were unable to negotiate a settlement with them for your repair costs).

If you are uninsured and are seeking to recover the cost of repairs to your car from the other driver or their insurer, get legal advice before signing up to getting a hire car through a credit hire company.

Help! I’ve already signed up and am not happy with the service!

The Australian Consumer Law applies to these types of credit hire agreements, including consumer protections such as unfair contract terms, and misleading and deceptive conduct.

Get legal advice if you are concerned about the circumstances in which you entered into a credit hire agreement.

What do I do if my courtesy car gets damaged or if I have caused damage to another car or property when using my courtesy car?

You should check your contract and see our Rental cars and insurance fact sheet.

Last edited: 22 July 2020