Credit hire finance for accident replacement vehicle companies

Yes, but a claims funder will advance less against claims it expects to be reduced, so the evidence behind each claim decides how much it will lend. Insurers often argue that the driver could have paid for an ordinary hire and that recovery should be limited to the basic hire rate, which lowers settlements and lengthens the wait for payment. Funders review the company's settlements against amounts invoiced, how it records each driver's means, its daily charges against local hire rates, and the solicitors handling its disputed claims. A book with consistent paperwork and realistic charges can support a higher advance and a longer facility. Our team prepares that history for funders before terms are discussed.

What is the basic hire rate in a credit hire claim?

It is what an ordinary hire company would charge for a similar vehicle, without the extra services credit hire includes, such as waiting for payment until the claim settles. Following the House of Lords decisions in Dimond v Lovell and Lagden v O'Connor, courts in England and Wales generally limit a driver who could have afforded a hire car to that basic rate, while a driver who could not pay without unreasonable sacrifice, often called impecunious, can recover the full credit hire charge. In McBride v UK Insurance the Court of Appeal held that the lowest reasonable rate quoted by a mainstream supplier is a reasonable approximation of the basic hire rate.

• Settlement history. Amounts invoiced against amounts recovered, by insurer.
• Means evidence. How the company records whether each driver could pay for hire.
• Rate evidence. Daily charges compared with local basic hire rates.
• Litigation panel. Solicitors handling disputed claims and their results.

The Court of Appeal judgment in McBride v UK Insurance summarises the hire rate rules. A claims book can be funded much like invoice finance, books owed by a few insurers may need high concentration invoice finance, and accident repair work links to motor trade finance. Instant Quotes shows a credit hire company which panel lenders could consider its claims book.

A credit hire company pays for everything up front and is paid at the end. The vehicle is on the fleet with finance payments running, it is insured, delivered and collected, and the hire charge builds every day the customer keeps it. The customer pays nothing at the time: the charges are claimed from the at-fault insurer once the hire ends.

How long that takes depends on the route. Where the insurer and the hire company both subscribe to the industry's voluntary protocol for credit hire, rates and settlement timescales are largely agreed and claims settle faster. Where they do not, or where the insurer disputes the claim, it passes to solicitors and may be litigated, and settlement can take a year or more. A growing company is therefore always funding a book of open claims that is larger than its monthly income.

Insurers also compete for the same work. Under the Association of British Insurers' Third Party Assistance Code, an at-fault insurer can contact the not-at-fault driver directly and offer its own replacement vehicle and repair. Every driver captured this way is a hire you never start, so volumes depend on how quickly your introducers, such as bodyshops, recovery operators and brokers, get the driver to you.

A hire claim is not a trade invoice. The insurer has no contract with you, did not agree the charge, and can challenge it. That is why ordinary invoice finance providers rarely fund credit hire, and why specialist claims funders advance a lower proportion of the invoiced value than a factoring facility would.

Funders build their advance from your own data. They look at the amount actually recovered on settled claims as a share of the amount claimed, split by insurer, by settlement route and by vehicle class. Prestige and specialist hires recover less consistently than standard cars because insurers dispute the like-for-like need more often. The common grounds of dispute are well known: the daily rate charged against the basic hire rate the driver could have paid, the length of hire against repair or write-off timescales, whether a replacement was needed at all, and, where the driver claims they could not afford to pay up front, the evidence of that.

The quality of each file matters as much as the totals. A funder auditing a sample of claims expects a signed hire agreement, a liability position, an engineer's report, evidence of the repair or write-off date and a record of contact with the insurer.

• Recovery rates can fall without warning. A shift in how courts treat hire rates, or a large insurer taking a harder line, reduces what the book is worth and what a funder will advance against it.
• Growth deepens the hole. More hires mean more open claims, so rapid growth needs more funding even when every claim is sound.
• Fraud exposure. Staged accidents and exaggerated hire periods damage recoveries and a funder's trust. Robust checks at the start of each hire protect both.
• Regulatory boundaries. If your business also seeks out or refers personal injury claims, check whether that is regulated activity; the FCA's policy statement on how it regulates claims management sets out the scope.
• Personal guarantees. Directors are commonly asked to guarantee claims and working capital facilities. Our guide to personal guarantees explains what you are signing.