What do I do if I receive a demand for hire car costs from 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 also briefly covers what you can do if you are being chased for someone else’s hire car costs from their credit hire company.

Case study

Beth had a car accident where she was at fault and uninsured.  The other driver was insured with BIG INSURER.  Beth negotiated with BIG INSURER to pay $3000 in repair costs for damage done to the other driver’s car. A few months later, Beth was shocked to get a letter from a CREDIT HIRE COMPANY saying the other driver had been given a hire car and she now needs to pay $600 in hire car costs to the CREDIT HIRE COMPANY too.   The other car was an old car that was only at the panelbeater’s for 2 days for repairs.

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 to their customer 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.

If you are insured

You should notify your insurer straight away, send them a copy of any letters received from the credit hire company and make sure your insurer will handle the matter for you.

If you are not insured

The not at-fault party is usually entitled to include hire car costs from the party at fault.  The credit hire company is generally authorised to collect those costs on behalf of the not at-fault party.

If you receive a letter of demand from a credit hire company for hire car costs following an accident, consider:

  1. Do you agree you are at fault? Get legal advice if you are not sure. Please note that the Insurance Law Service is unable to give legal advice about liability in motor vehicle accidents
  2. Did the other party need a car? Are the car hire costs claimed reasonable? What is the reasonable cost of hiring a replacement car that is the same as or similar to the damaged car in the other party’s area?  Was the time taken for the damaged car to be repaired reasonable?
    Sometimes a credit hire company may charge more than the daily market rates for a particular car.  Credit hire companies often have higher costs arising from having to chase the at fault party for the hire costs, and some may seek to pass this on through a higher daily rate.  Whether they can pass on those additional costs to you has not been fully settled by a court  – but there is room to argue that those costs should not be passed onto you

If you don’t agree with what you are being chased for, you should raise a dispute and see if a resolution can be reached.  If so – get the terms set out in writing.  If you cannot afford to pay the amount all at once, you can try to negotiate a payment plan.

If negotiations don’t work, the car hire company has the option of starting legal action against you.  They generally have 6 years from the date of the accident (or 3 years in the Northern Territory) to start legal action against you.  They will often add on court and legal fees.

You will have the opportunity to lodge a defence, but you should get legal advice first.  If things don’t go well in court, you could end up paying the other side’s court and legal costs as well.  Your local Legal Aid office or community legal centre (you can search by postcode) could give you some advice about court processes and fees in your state or territory.

Last updated: 22 July 2020