Loss of use claim: credit hire, courtesy car and mitigation

The compensatory principle and the early case law

The starting point is the compensatory rule of restitutio in integrum from Livingstone v Rawyards Coal Co (1880) 5 App Cas 25: the claimant is to be put back, so far as money can do it, into the position they would have been in had the wrong not been done. Loss of use of a chattel is a recoverable head of damages where the chattel has been damaged or destroyed by the defendant’s negligence and the claimant has been deprived of its use during the repair or replacement period.

Liesbosch Dredger v SS Edison [1933] AC 449 established the older, stricter rule: the claimant could recover the market measure of the loss, not the more expensive substitute they were forced to obtain because they could not afford the cheaper option. The Liesbosch approach was hostile to claims by impecunious claimants for the higher cost of credit-based substitutes. For decades it was the principal obstacle to credit hire claims because credit hire rates were materially higher than spot hire rates and the strict Liesbosch reading meant the claimant could only recover the spot rate.

Lagden v O’Connor [2003] UKHL 64 changed this position in the negligence context. The claimant could not, as a practical matter, lay out the spot hire rate up front (he had no available cash and limited credit). He took a credit hire vehicle at a higher rate. The House of Lords held that the impecunious claimant could recover the credit hire rate because that was the only realistic replacement vehicle available to him. The decision did not overrule Liesbosch but ‘read it down’ - Liesbosch survives in contract, but in negligence the impecunious claimant can recover the credit-based substitute. The practical effect was to validate credit hire as a recoverable head of loss.

Dimond v Lovell and the Consumer Credit Act compliance regime

Dimond v Lovell [2002] 1 AC 384 is the technical companion to Lagden. The House of Lords held that a credit hire agreement that did not comply with the Consumer Credit Act 1974’s disclosure and form requirements was unenforceable as a regulated credit agreement, and that the claimant could not recover the hire charges from the at-fault insurer because she had not lawfully been bound to pay them. The decision forced the credit hire industry to rebuild its contractual documentation to comply with the Consumer Credit Act regime.

Compliance is now routine. A credit hire agreement must comply with the Consumer Credit Act 1974’s disclosure rules under sections 60-64, the prescribed-terms requirements under regulation 6 of the Consumer Credit (Agreements) Regulations 2010 (SI 2010/1014), the FCA’s consumer hire rules under CONC 2 and the broader FCA conduct rules. The agreement must be in writing, signed by the customer, with full disclosure of the rate, the period, the cancellation rights and the indemnity for the customer against the underlying invoice. Non-compliance is fatal - the agreement is unenforceable and the credit hire charges are irrecoverable.

The post-Dimond compliance regime is now the industry standard and reputable credit hire companies maintain rigorous compliance processes. CityGrip’s credit hire agreements comply with the full regulatory framework as a matter of operational policy because non-compliance would put the claim at risk for both the claimant and the at-fault insurer. Compliance audits are part of the claims-handling discipline.

Basic hire rate, credit hire rate and the rate negotiation

The recoverable rate is either the basic hire rate (BHR) - the spot rate available to an ordinary self-funding hirer with cash available up front - or the credit hire rate where the claimant is impecunious within the Lagden v O’Connor test. The basic hire rate is established by reference to commercial hire-firm rates for an equivalent vehicle from established suppliers (Avis, Hertz, Enterprise, Europcar, Sixt, Budget) with comparable terms. The credit hire rate is the rate the credit hire company actually charges, which is typically 30-50% higher because it reflects the credit terms (no upfront payment, indemnity for the claimant against the underlying invoice, deferred recovery from the at-fault insurer).

Impecuniosity is a factual question. A claimant whose available cash and credit at the time of the accident would have enabled them to lay out the spot hire deposit (typically £500-£2,500 depending on the vehicle and the term) is not impecunious for Lagden purposes. A claimant who would have had to forgo other essential expenses or take on disadvantageous credit to do so is impecunious. The leading case on the threshold is Pattni v First Leicester Buses [2011] EWCA Civ 1384 and the line of subsequent authority. Bank statements, credit card statements and a witness statement on income and outgoings are the standard evidence.

Where impecuniosity is contested, the negotiation runs between the credit hire rate (claimed) and the basic hire rate (offered). Many files settle at a blended rate that reflects the parties’ respective assessment of the impecuniosity evidence. Where the parties cannot agree, the rate is for the court at trial. The basic hire rate evidence - the supplier rates relied on, the dates, the vehicle specifications - is the central battleground on most credit hire trials.

The recoverable period and the duty to mitigate

The recoverable hire period is the reasonable period during which the claimant’s vehicle was off the road and a replacement was needed. On a repair claim this is the repair period plus a reasonable contingency for insurer reserve-setting, parts supply, engineer inspection and (if needed) repeat inspection. A routine repair (panel replacement, paint, mechanical work to a non-structural component) is usually completed within 7-21 days. A complex repair (structural work, parts-on-order, electrical fault diagnosis) can run 30-60 days. The engineer’s estimate is the documentary anchor.

On a total loss claim the recoverable hire period is from the accident date to the date the total-loss settlement is paid, plus a reasonable period (typically 21-30 days) for the claimant to find a replacement vehicle. The settlement timing is largely within the at-fault insurer’s control; an insurer who delays settlement extends the hire period and the resulting credit hire charges. Disputed-valuation files where the insurer’s initial offer is unreasonably low extend the period further.

The duty to mitigate runs throughout. The claimant must: return the hire vehicle promptly once the original is fit to be driven; not upgrade beyond a reasonable class of replacement; pursue the repair or total-loss settlement actively (chase the insurer, push for engineer inspection, accept reasonable offers); and not use the hire for purposes the original would not have been used for. Failure to mitigate reduces the recoverable hire period and (in some cases) reduces the rate. The at-fault insurer will often raise mitigation as a defence to the duration claimed; the credit hire company’s job is to document the mitigation steps in real time so the defence can be answered.

Courtesy cars: the alternative on the comprehensive policy

A courtesy car is a temporary replacement vehicle supplied free of charge by the insurer or repair garage during the repair period. It is provided under the claimant’s own comprehensive policy - not under the at-fault driver’s insurance - and the cost is absorbed by the claimant’s insurer (in turn recovered, subject to policy terms, through subrogation against the at-fault insurer). Courtesy cars are usually small, low-specification vehicles (Ford Fiesta, Vauxhall Corsa, Renault Clio) regardless of the size or class of the claimant’s own vehicle.

The courtesy car is the simpler option for the claimant - no credit agreement, no impecuniosity question, no rate negotiation. But it is a downgrade for any claimant whose own vehicle is larger or more specialised than a small hatchback. A family with three children and a load-carrying SUV does not get the equivalent of a family SUV; they get a small hatchback. A business user with a luxury saloon does not get a luxury saloon; they get a small hatchback. The courtesy car works for some, frustrates others.

Credit hire is the alternative for claimants who need a like-for-like replacement. Under Lagden v O’Connor the like-for-like principle entitles the non-fault claimant to a replacement that matches the original by class, body type, drivetrain, equipment level and (where applicable) ULEZ / CAZ compliance. The cost is recovered from the at-fault insurer rather than absorbed by the claimant’s own policy. See our credit hire vs courtesy car page for the detailed comparison.

Notional loss of use: the no-replacement alternative

Where the claimant did not hire a replacement vehicle and was nevertheless deprived of the use of their own, a notional loss of use sum is recoverable. The amount is conventionally assessed by reference to a modest daily figure reflecting the loss of utility. Historically the AA running cost tables were the starting point, with marginal running expenses deducted (the claimant did not incur fuel or wear-and-tear during the off-road period). The current convention is in the range of £8-£20 per day for a typical family car, higher for prestige or specialist vehicles, lower for older vehicles or vehicles already approaching scrappage.

Notional loss of use is the right approach where the claimant managed without a replacement: working from home, alternative transport available (family vehicle, public transport, walking distance), the off-road period short enough that no hire was practical, or the claimant did not want the inconvenience of a hire arrangement. It is not a substitute for credit hire where credit hire would have been the better economic outcome; the claimant cannot retrospectively claim hire charges they did not incur. The choice between credit hire and notional loss of use is made at the time of the accident, not at the settlement.

Need: the threshold question and the Bee v Jenson line of authority

Before recoverability of either basic hire rate or credit hire rate engages, the claimant must establish ‘need’ - that they actually required a replacement vehicle during the off-road period. Need is presumed for a non-fault driver who has been using their vehicle as a routine daily mode of transport, but it is not automatic. Where the claimant has alternative transport readily available (a second household vehicle, a partner’s car, a sustainable public transport route to all destinations) the at-fault insurer can argue that the hire was not reasonably needed and the claim for hire charges should be reduced or refused.

The leading authority on the need point is Bee v Jenson [2007] EWCA Civ 923, where the Court of Appeal addressed whether a claimant with a second household vehicle could nevertheless recover credit hire. The Court held that the existence of a second vehicle does not automatically defeat the claim because the second vehicle is usually being used by another household member and is not interchangeably available. The need question is fact-specific: who uses the second vehicle, when, for what purposes, and could the household have realistically managed with one vehicle during the off-road period?

Self-employed claimants and commercial drivers usually establish need easily because their vehicle is integral to their work. PHV drivers (Uber, Bolt, Addison Lee, FreeNow), couriers, multi-drop delivery drivers and field-service technicians all have a strong need case. See our replacement car after accident page for the broader replacement-vehicle service. For commercial vehicle claimants need is structurally clear because the alternative is loss of earnings.

Basic hire rate evidence: Stevens v Equity Syndicate and the post-2015 rate methodology

Where the claimant is not impecunious within the Lagden v O’Connor test and the basic hire rate is the recoverable rate, the question is what that rate actually is for the specific vehicle and the specific hire period. The leading authority on rate evidence is Stevens v Equity Syndicate Management [2015] EWCA Civ 93, where the Court of Appeal addressed the methodology for establishing the basic hire rate. The Court held that the rate must be established by reference to the rates a self-funding hirer would have paid at the time, from a reasonable cross-section of mainstream commercial hire suppliers (Avis, Hertz, Enterprise, Europcar, Sixt, Budget) with comparable terms.

The Stevens methodology rejected the earlier ‘lowest rate’ approach in favour of a reasonable-rate-from-mainstream-suppliers approach. The rate evidence is typically a survey of three to five suppliers’ published rates for an equivalent vehicle on the actual hire dates, with adjustments for the standard rental terms (CDW excess waiver, additional driver, mileage allowance, fuel policy). The figure used in the litigation is usually the median or the lower-quartile of the surveyed rates, depending on the evidence available and the negotiation positioning.

The credit hire industry maintains comprehensive rate databases for the principal vehicle classes from the principal suppliers, refreshed at intervals through the year. The at-fault insurer’s engineers often run a counter-survey. The negotiation between competing rate surveys is the main battleground on most rate-dispute files. Where the parties cannot agree, the rate is for the court at trial - and the evidence the court will consider is the supplier rate documentation, the dates relied on and any expert witness evidence from rate analysts.

CityGrip’s loss of use service

CityGrip arranges Lagden-compliant credit hire as the standard property-damage response on non-fault accident files. The vehicle is matched to your own by class, body type, drivetrain, equipment level and (where applicable) ULEZ / CAZ compliance. The credit hire agreement complies with the Consumer Credit Act 1974, the Consumer Credit Agreements Regulations 2010 and the FCA’s consumer hire rules. We document the off-road period, the rate evidence, the mitigation steps and the like-for-like specification throughout the file so the recovery from the at-fault insurer is fully supported.

Where credit hire is not the right option - claimants who do not need a vehicle during the repair period, claimants who prefer the simplicity of the comprehensive-policy courtesy car, claimants whose damage is so light that the off-road period is too short to justify hire - we document the notional loss of use position and claim that head instead. We do not run personal injury claims; with your explicit consent we introduce injury claims to an SRA-regulated panel solicitor on disclosed referral terms.

Related guides: credit hire, credit hire vs courtesy car, replacement car after accident, car write-off claim, diminished value claim, who pays for what.