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Sadly I have already started to see dealerships and some brokers trying to benefit from the ignorance of consumers and SME’s by manipulating the FCA rules to their advantage. So in this extract from my new updated book, launching in 2017, I have exposed some industry secrets, never before explained and then answered some fundamental questions about Personal Contract Purchase as to why most consumers use this product to finance their new cars and yet the vast majority of businesses use Contract Hire, a product that is also available to consumers.

I’m going to talk about, what appears to be, one of the motor industry’s great mysteries. Recent statistics, from a variety of sources, show that somewhere in the region of 85% of new cars, acquired by consumers, are financed on a Personal Contract Purchase (PCP), with less than 5% financed on Contract Hire, often referred to as a lease. But this isn’t the case with businesses who have accountants and fleet specialists to advise them on the best method to use. Around 85% of businesses acquire their cars through Contract Hire. So why should this be so?

One could argue that PCP is only available to consumers so businesses are denied this facility. Not true, it is possible, from some funders, to arrange a business Contract Purchase with a guaranteed future value, allowing the business to simply hand the car back or purchase it, at the contracted figure, at the end of the agreement, as you or I would do with a PCP. But businesses aren’t interested, for a number of reasons, the main one being cost. And as business takeup of Contract Purchase has been so low, many leasing companies have dropped it from their product range.

So if contract hire is so great for businesses why does it only account for less than 5% of new cars funded by consumers? The answer must surely be VAT as VAT is charged on the contract hire initial and monthly rentals? And as businesses can claim back 50% of the VAT this must be the reason for the high business take up? As PCP payments don’t have VAT added it must therefore be a better product for consumers? Again not strictly true. Firstly many businesses are not VAT registered so they can’t claim back the 50% of the VAT from the VAT man anyway. Secondly, the VAT man isn’t dopey, he will get his pound of flesh one way or the other.

In the case of a car, if you contract hire the car, without getting too technical, the contract hire company can claim back 100% of the VAT it pays on the new car. So a car costing £20,000 + VAT actually only costs the leasing company £20,000 because the car is a business asset that no-one in the leasing company will have use of. It applies its magic formula, allowing for the balloon payment, interest charges and admin costs and comes up with a monthly figure. The VAT man needs some money so he now insists on VAT being applied to the monthly payment. However, with a PCP, whilst the formula for calculating the monthly cost is very similar, as you will have ownership rights in the car the finance company cannot claim back the VAT on the purchase price of the vehicle. Don’t ask – it’s the rules.

So instead of making his calculations based on a purchase price of £20,000 he now has to make his calculations based on a purchase price of £24,000 (£20,000 + VAT). But here is the crunch. Included in both calculations are interest charges. In a lease the interest is calculated on the net purchase price of £20,000 whilst a PCP uses a purchase price of £24,000. So with a PCP you pay additional interest on the unrecoverable £4,000 worth of VAT. I hope you followed that but if you didn’t let me explain simply: In summary, and often contrary to advice given by car salesmen, paying VAT on the contract hire rentals is better for you than making PCP payments that effectively include VAT as well as an additional chunk of interest charge. MYTH EXPLODED!!!!!

Maybe the difference is in rate? Do consumers get charged a much higher rate than businesses making contract hire much less attractive. If you are a business user would you not expect to lease a car for less than a consumer and if you were a large company with hundreds of cars would you not expect to lease cars for less than say a sole trader or small business? Again the answer is no. Whilst one might assume this to be the case, thanks to a rather bizarre ruling, introduced by Labour Secretary of State for Trade and Industry at the time, Stephen Byers, there can be no discrimination between the terms offered to businesses of any size and to those offered to consumers.

The rule falls within the Supply of New Cars Order 2000. So that argument doesn’t stand up to scrutiny and my own experience suggests that most leasing companies operate a like for like rate system. So consumers and SME’s enjoy the same cheap rates enjoyed by some of the biggest companies in the country. Dealers may cite the VAT case and the differential between lease rates provided to consumers compared to businesses as reasons why you should opt for the wildly popular PCP but you now know the truth. Unfortunately as more consumers are convinced of the ‘advantages’ of PCP it becomes a self fulfilling prophecy.

The more people that take out a PCP the more that dealers can claim it to be the best product suggesting that 85% of consumers can’t all be wrong! So it’s clear to see that dealers would prefer you didn’t know the above, as the VAT implications are often part of their sales pitch. But I’m now going deeper. I’m going to take you to the dark side and expose the way that a large number of PCP users are simply led by the nose in the name of profit and are often not even offered the choice of PCH.

OK, let’s say you are a salesman working in an electronics store selling TV’s. You have two virtually identical TV’s all the same features, same size etc. For selling one TV the salesman is told he will make £30 commission but for selling the second he will be paid £100 commission. Boy will he find features in the second TV that probably haven’t even been invented yet! However many times salesmen are told to ‘treat customers fairly’ and be honest about the products and not misrepresent them, money talks. So when a salesman is incentivized to sell PCP he will of course sell PCP over HP or any other product.

The reason for the greater incentive is that the finance provider makes significantly more interest out of a PCP and as only 20% of customers ever buy their car on PCP the leasing company also stand to make a profit out of the resell of the car at the end of the contract along with any excess mileage charges and charges for repairs. First off let’s look at the shady comparison between a 3 year PCP agreement and a 3 year HP agreement and the reason why the dealer and lender prefer PCP. Your intention is to own the car at the end of the 3 years, either by paying off the final balloon payment, incorporated into the PCP, or simply paying off the whole of the HP. You are paying exactly the same APR on both agreements – this is important.

The car is a £20,000 car after you have paid the deposit. Now if you took the car on a PCP with an £8,000 final payment, also known as a balloon, the monthly payment over 3 years would be £460.45, according to an online calculator. If you add in the balloon payment you would end up paying £24,576 in total. So let’s be clear, you buy a £20,000 car after deposit on a PCP on 10% APR over 3 years and pay the balloon to own the car at the end of 3 years. If you were to take a straight HP over 3 years on 10% APR you would pay £645.34 per month which makes the total amount payable to be £23,232. So you end up paying over £1,300 more on a PCP over the same period on the same APR – That my friends is why dealers and lenders prefer you to take a PCP over an HP agreement!!! The lender makes more and in turn pays more to the dealership in commission.

I have actually been in showrooms where sales staff have said things like: ‘On a PCP you push back part of the cost to the end of the agreement. As you pay no interest on that final figure – that is the reason why the monthly costs are so low compared to HP.’ Completely wrong. The structure of the deal is such that the final balloon payment is the equivalent of an interest only loan. It is far from interest free. It’s like taking out an interest only mortgage of let’s say £200,000 over 15 years. You pay much less than a repayment mortgage per month but you still owe the £200,000 at the end of the agreement. Same principal.

Another common statement used if a customer asks about PCH is something like, ‘Contract hire is mainly for businesses, the rates are cheaper for business users and whilst businesses can claim back the VAT of course you can’t as a consumer so not only are you likely to be paying more per month in the first place you have the added burden of VAT which isn’t applied to PCP payments’. Again, as you can see from above totally misleading and completely untrue. And finally, ‘With PCP you have the choice of buying the car at the end of the agreement or you can simply hand the car back, unlike a lease where you have no choice. Added to which you will no doubt have a profit in the car at the end of the agreement which you can put down on the next car.’ Again, not strictly accurate.

With some PCH funders you have the opportunity to buy the car at the end of the lease at something around trade value but this is trade value at the end of the lease, it isn’t a pre-determined figure. As only 20% of PCP customers buy their cars at the end of the agreement it doesn’t appear to be a major benefit. And if you have a ‘profit’ at the end of the agreement it isn’t actually a profit, you have simply paid more depreciation than was necessary and you are receiving a refund of the money you have paid. Moving on to Contract Hire for consumers, known as PCH, I hear from customers constantly, after visiting dealerships, that PCH is not even offered.

This can be for a number of reasons, often the most obvious is that the salesman is not even aware of the availability of the product. And even if he is he often hasn’t been trained sufficiently to be competent enough to be able to provide you with a comprehensive guide to the product. On the other hand he may know of the product but, like the TV salesman, the incentive may not be so great for him to sell it in preference to PCP. The problem for dealerships is that generally speaking, the price they have to sell the car to their leasing company is dictated by their quoting system and is generally less than what they would sell the car for on a PCP.

The good news for consumers is that they don’t have to go through the negotiating thing, the computer system has already been geared up to your advantage. In many cases the car manufacturer provides the leasing arm with some extra bonus that wouldn’t be available when you take a PCP. It can be shocking to learn that the combined discount from the dealer and the bonus from the manufacturer can sometimes reach 45% off the retail price of the car. And it is very common for discounts of 25 – 30% to be incorporated into the contract hire rate. And here’s the thing, when you contract hire a car all that will appear on your quotes and on the agreement is the rental. No mention whatsoever of the cost of the car. But on a PCP quote and on the agreement the price of the car must be shown.

It would hardly help the sale of the used, 12 month old cars on the dealer’s forecourt if it could be seen that new cars were being sold cheaper than their 12 month old cars. Used car sales, often with more profit in, would collapse as customers learned the truth. But supply a £30,000 car on rentals of £200 + VAT per month – and it seems like a pretty good deal. The fact that a 40% discount has been built into the rate has no effect on the dealer’s used stock. Having said that, in an effort to help the franchised dealers retail more vehicles, manufacturers and the leasing companies can provide discounts in the form of: Manufacturer’s contribution, PCP contribution and Dealer Contribution but even then they won’t normally discount as much as may be achieved in a PCH. Even a discounted APR, free tank of fuel and even free service can still be considerably short of the 30% or £6,000 off a £20,000 car that can then be hidden away in a contract hire rate.

So there you have my thoughts on PCP vs PCH. I am not dismissing PCP as it can occasionally work out cheaper if the manufacturer is not giving away any extra bonus to the leasing companies but the manufacturer bonus is allowing the leasing arm to provide discounted APR on PCP agreements. It may also be convenient to pay extra per month if it results in some equity in the car at the end of the agreement. In other words, if the final payment is say £8,000 and the dealer offers £9,000 in part exchange, giving you £1,000 towards the next car. However, this is a gamble and there is always a chance that the car isn’t worth the final balloon payment. And as only 20% of cars financed on PCP are ever bought it suggests that this is rarely the case. I should also add that PCP can certainly work well on used cars, especially as you cannot usually arrange PCH on a used car.

My final thought is don’t dismiss HP if you are still hell bent on owning or at least having the option to own the car at the end of the agreement. Before the sudden surge in PCP consumers would generally use HP as their funding method of choice. They would finance the car over 5 years with no intention of keeping the car for 5 years. It was common knowledge that after 3 years you could settle the finance and for most cars you would be at the sweet spot when the settlement figure to the finance company matched the trade value of the car. It doesn’t take an accountant to realise this is pretty much what happens with a PCP. After 3 years you settle out the finance simply by handing the car back and this is the advantage of PCP if the car is worth less than the final payment, the finance company suffers the loss. With HP you may not suffer the loss, you would probably keep the car a little longer till the settlement matched the car’s value.

But here’s another revelation. Take the PCP example above on the £20,000 car with an £8,000 balloon, as you can see the monthly payment is £460.45. However, if you took out a 5 year HP on the same APR you would pay just £427.14 per month and guess what, the settlement figure at the end of 36 months is £8,135. So whilst the car salesman may rave over the benefits of PCP you may be better off with an HP agreement, in this case you would be £1,000 better off over the 3 years.

To sum up each type of finance has its place. What I’m suggesting is that when financing a new car you look at all options including HP, PCP and PCH to make sure that you are getting the best deal to suit your needs. And if you are currently looking at a used car as this is all you feel you can afford consider a new car on PCH you might be pleasantly surprised.  By Graham Hill

Are electric cars the way forward? Clearly as far as the environment is concerned of course it is so why are many fleets taking them off their options list and consumers becoming reluctant to buy or lease them? Cost has always been a problem but the costs have been dropping whilst driving ranges increase.

So why are people not only refusing to take electric vehicles but also the plug in hybrids? The answer according to Business Car is charging points. There is still a grave lack of charging points but not only that, early points need to be replaced as many are no longer working and those that are, are simply inefficient or have the wrong connection points fitted.

The Government which was fairly and squarely behind this project has let the industry down according to experts, something that Transport Minister, John Hayes is well aware of. One of the issues that needs to be addressed is the mapping of charge point locations that was to be undertaken by Government. Not only the location but also which charge points were most suitable for which car.

In a survey it was found that only 25% of fleets offered a plug in model to its drivers whilst 69% of drivers said that they would be happy to drive an electric car. John Hayes has agreed to take the issues on board and look into the infrastructure as this is clearly a barrier to EV expansion.

He is also looking into driver education although I would suggest that this isn’t needed as drivers are very much in favour of electric vehicles. So if you are looking into an electric vehicle at the moment it may be worth some extra investigation before taking the plunge. By Graham Hill

Technology is advancing at an amazing rate in cars to the point where many new and used car drivers are quite oblivious to some of the latest features fitted to their cars. It is bad enough getting to find out what is fitted to your car when it is new but when you buy a used car from a used car lot the chances are that the dealer hasn’t a clue so you’ve no chance.

However, as always Hill is here to help so here is a breakdown of some of the latest features and what they do: 360 Degree Cameras: Rear parking cameras have been with us for about 15 years but the low cost of cameras and new technology enables you to have an all round view of the car and in some cases an image of your car from a position above. This technology can help with parking, especially into car park bays with cars either side.

However, what we need is continual surveillance and a voice that tells anyone, in no uncertain terms to F*** Off if they are about to key the side of your car and inform them that they have been photographed – something I could have done with a year ago. Bastards!

Autonomous Emergency Braking (AEB): This uses sensors to check to see if you are getting too close to an obstacle when driving. If, given your speed, you are getting too close a visual and audible warning is given. Get too close, where the system senses an accident is about to happen, and the brakes are applied with sufficient force to enable you to stop before impact. Euro NCAP safety tests favour cars with this feature fitted as it is believed to prevent 38% of rear end crashes.

Lane Departure Warning: Does what it says, if it feels that the driver is drifting across the lane markings the system will alert the driver with either an audible and/or visual alert and in some cars a vibrating steering wheel (leave it). This feature is already standard on many new cars.

Traffic Jam Assistance: This uses AEB technology along with lane departure technology to keep you in the lane in slow moving traffic with little intervention by the driver.

Blind Spot Warning: this detects cars approaching either side of the car from behind using radar technology to detect cars approaching in your blind spot. It doesn’t do this every time a car is about to overtake or a bike undertake – that would be silly!  Only when it senses that you are attempting a lane change and senses an approaching vehicle will it sound an alarm or lights appear around the door mirror on the side that the vehicle is approaching. Automatic Main Beam: You can switch this on continuously but will only automatically activate when the light dictates. The system senses when you are approaching a car in front or a car is approaching you from the opposite direction and automatically dips the main beam. It can even detect cyclists approaching and also drops to dip beam in lit up areas. Some new LED units can now give the driver as much light in front even though the headlights are no longer dazzling approaching drivers. Clever!

Rear Collision Warnings: This clever system senses a fast approaching car from behind and immediately switches on the hazard warning lights to alert the driver of both vehicles. If the car continues to close fast the seatbelt pre-tensioners are applied and the brakes are also applied to reduce whiplash injury and attempt to stop the concertina effect.

Evasive Steering Assist: This system senses an approaching vehicle on a single carriageway and prevents the car from veering into its path. Some systems can sense a pedestrian walking into the path of the car and allows the car to gently swerve to miss the person then return to the normal driving line.

Rear Cross Traffic Alert: This is activated when reversing out of a parking space and can sense anyone else approaching, possibly also in reverse, and stops the car in order to prevent a collision. Some can also sense cyclists and pedestrians.

Speed Limit Detection: This picks up the speed limit from speed limit signs and adjusts the cruise control speed automatically. It can also place the speed limit on the screen if you are exceeding it and it will gradually adjust the adaptive cruise control speed down to within 5mph of the limit. So there you have it, some of the latest advances in technology, most of which is either available as an optional extra or fitted as standard on new cars. By Graham Hill

I’ve talked about this subject before but recent statistics has caused me to mention it again. It seems that nearly six million drivers are caught out by auto renewals of their insurance, losing on average almost £120 per annum. I have to say when I changed my insurer at my last renewal I saved nearly £400 per annum so I know how important it is to shop around every year.

The research was carried out by comparethemarket.com and revealed that the average saving by shopping around is £119.39, up from £106 at the start of the year. Younger motorists suffer most when auto renewing with premiums being up to 30% more than could be achieved by shopping around.

And don’t just go onto the comparison sites, don’t forget that some of the cheapest insurers such as Direct Line are not on the comparison websites. So make sure you try them as well. Although I would strongly advise against Zurich who tried every way they could to avoid paying out on a damaged laptop of mine.

The Financial Ombudsman Service told them on 3 occasions to pay out but it wasn’t till the Ombudsman made a final ruling, two and a half years later, that they were told that they were wrong not to payout. They are crooks – don’t use them! Also don’t overlook insurance brokers, they certainly come into their own in the event of an accident and dealing with the paperwork. By Graham Hill

One of the most common questions I get asked is how to finance your leased car. You have a number of choices if you run your own business, less of a choice if you are employed and only have one option provided by the company – finance the vehicle yourself then recharge the company for your business mileage.

But for many of my clients it can be a dilema which the HMRC is about to complicate further if their proposed changes go ahead. We knew that they were looking into Salary Sacrifice schemes which can get very complicated because it allows employees to pay for their car out of gross income rather than what the rest of us do and pay out of income after tax and NI has been paid.

I wasn’t surprised when it was announced that the HMRC were looking into this as they not only miss out on employee tax and NI payments but also employer NI. However, because of the very complex recording and reporting of car usage it has only been viable for providers of salary sacrifice to make available to companies of over 100 employees. And with only 80 – 100,000 cars on such schemes it has not grabbed the attention of the guys in HMRC.

However, it now seems that the net is widening and the tax man is now looking at the way company owners, directors and employees finance their cars in an effort to raise more money. They have taken the view that the provision of a car allowance should be lumped into the investigation.

With the proposals potentially being included in the Autumn Statement 2016 we could see the new rules effective from April 2017 this is worrying for those receiving car allowances, especially if they have opted for an Ultra Low Emissions Vehicle (ULEV). If they had opted for a company car they could end up paying less tax than taking a car allowance. Very complicated but worth discussing with your accountant before making the decision. Once they have completed the consultation and finalised the rules I will let you know. By Graham Hill

The reason to install a dash cam in your car was originally to avoid arguments over insurance claims following cash for crash claims. These claims come about following an incident whereby a driver swerves in front of you, brakes hard, giving you virtually no time to stop causing you to run into the back of their car.

The driver and the passengers of the car in front all claim for whiplash injuries whilst you lose all your no claims bonus. With dash cam evidence the police can carry out an investigation and often prosecute the driver of the car in front on a variety of charges.

However, whilst dash cams are one of the biggest selling gadgets right now and Citroen have started fitting them as standard in their latest C3 to combat cash for crash crime, there are other reasons why you should install dash cams. They are invaluable for general claims as insurance companies become increasingly lazy.

In a recent case I read about a young driver who was sitting stationery in a backed up queue on a roundabout, when another impatient driver decided to take a quick route then cut in modifying the front end of her car. She was clearly not at fault so she claimed through her insurer for the repairs only to find that the other driver had made a claim against her insurance company, not only for repairs but also, guess what? Yep, whiplash.

The advice from her insurance company was to accept liability as in court a judge would be unlikely to find in favour of a newly qualified driver having an accident on a roundabout. That is a disgrace. However, had the young driver, whose premium was already ridiculously high and set to go higher, had a dash cam fitted the case would have been open and shut.

So isn’t it about time that manufacturers followed Citroen’s lead and started to install cameras as standard into the back of the rear view mirrors to help drivers to keep on the road and minimise claims times and costs as well as help police investigating accidents? After market dash cams are unsightly with wires dangling which puts drivers off installing them but maybe if the insurance industry and car manufacturers got their heads together we could see an end to cash for crash, quicker claims turnarounds, a decrease in insurance premiums, less time spent by police investigating accidents and more prosecutions. GH climbs down off soapbox for a sit down and cup of tea! By Graham Hill

I’ve warned in the past about selling your car that has hands free Bluetooth fitted and the need to delete your stored telephone numbers, especially if you have stored sensitive numbers that you wouldn’t want others to know. Well the situation is getting worse now that ‘connected’ cars are now being sold on or part exchanged.

Some cars built over the last couple of years are capable of connection to mobile devices via apps which is great for the owner of the new car but it can lead to all sorts of problems when these connected cars are bought by used car buyers down the line.

Tim Church from Weston-Super-Mare found this out when he sold his Land Rover Discovery Sport only to find that sometime later he was still able to access the car’s InControl App via the app on his phone. From his app he could still see the location of the new owner as well as whether the car was locked or not.

The latest connected facilities can include pre-warming or cooling the car from your app, remotely unlocking the car, downloading music as well as knowing where the car has been and is currently located. When questioned by Auto Express Land Rover said that it was the responsibility of the previous owner to remove the vehicle from their account when they sell it. I’m sure this will be of great comfort to new owners of Land Rovers! By Graham Hill

Good news for those who have a car that needs some repair work carried out on it and you have it done by a non-franchised (not a main dealer) garage. If the work isn’t carried out satisfactorily the normal course of action is to have a row with the garage and threaten legal action if he refuses to refund your money.

In future motorists will be protected from disputes with independent garages over unsatisfactory work as a result of a new £1,000 industry guarantee introduced by The Independent Garage Association (IGA). They pledge to cover bills of up to £1,000 from non-franchised garages who have signed up to their Trust My Garage scheme.

The scheme is due to come into force later in 2016 if work is found to be sub-standard and the garage refuses to pay back the money. As part of the terms of membership of any trade association the association has to provide an Alternative Dispute Resolution (ADR) service, which IGA do, using the National Conciliation Service.

If the ADR finds in favour of the motorist the garage is obliged to pay whatever is awarded. However, if they still don’t pay, the IGA will pay up to a maximum of £1,000 per claim. There are currently around 2,700 member garages and growing according to IGA. You can find your nearest IGA garage by visiting www.trustmygarage.co.uk By Graham Hill

One of my customers, Zamir Hussain, has rather bizarrely found himself in court following an accident that wasn’t his fault. He was provided with a like for like replacement car (not cheap considering he has a Range Rover) but after the other driver’s insurance company disagreed with the amount claimed for the hire car he now has to go to court.

He could end up having to pay all or part of the bill which is several thousands of pounds and serves as a stark warning to anyone involved in an accident. The situation requires a little unravelling so please bear with me. You’ve had an accident that wasn’t your fault and your car is booked in for repair. There is no dispute that the other party is at fault.

You now have one of two choices, you can claim through your insurance company which means that you lose your no claims discount or you can make the claim yourself against the other party. However, and this is the first point to note, you must advise your insurance company that you have been involved in an accident. Failure to do so could cause your insurer to refuse to insure you in future. You should send a letter to your insurance company making it perfectly clear that you are not making a claim, simply advising them.

So you have advised your insurance company and you are now faced with another choice. The bodyshop repairing your car may offer you a courtesy car. This is exactly what it is, a courtesy provided by the repairer, which tends to be a small engine’d modest car to keep you mobile. On the other hand your insurer may suggest that you take a like for like car and recommend a credit hire company who will provide you with a car, either the same as the one you drive or a similar grade. By taking this route you don’t lose your no-claims bonus but the car rental is in your name.

The agreement between you and the credit hire company includes payment terms. They will seek to recover the cost from the other party’s insurance company but, and this is a big but, if the other insurance company refuses to accept liability for the accident or for any other reason refuses to pay, you are liable as the agreement is in your name.  Whilst you may feel you have a right to expect a like for like replacement there is an overriding obligation on you to mitigate the costs to the other party (and his insurer) in the event of an accident.

For example if you have an accident that wasn’t your fault and you feel your car is driveable, then instead of having the car checked by an engineer you continue to drive it, you could cause additional damage. If subsequently it is found that you have caused irreparable damage to the engine the other person’s insurance company would most certainly challenge a claim for a replacement engine – and probably win.

It seems that some insurance companies are challenging hire costs, not because they are too high for the car but that a direct replacement shouldn’t have been provided in the first place using the mitigation of cost argument for the challenge. They will also challenge a rental charge for a replacement car if you keep the hire car after your car has been repaired. You may stand a better chance of your claim succeeding if you lease your car. You should point out that you are still paying for the lease of your car whilst it is being repaired so you should be entitled to claim for a like for like replacement.

Some Credit Hire companies also provide a total risk agreement whereby, unless you have deliberately tried to defraud them, they will cover the cost in the event that they end up in court and lose the case. You need to check beforehand. It now starts to get a little messy. If you end up in court you may be asked if a courtesy car was offered and why you didn’t accept it. The advice is that you should tell the credit hire company if you are offered a courtesy car (you may be asked in court why it was essential to have a like for like car as opposed to a small courtesy car).

If you are not able to use the hire car during the period that your car is being repaired, for example if you are on holiday or you are unable to drive through injury or illness then the claim for that period could be thrown out. Here is another strange twist. Credit hire is known to be the most expensive way to finance a rental car. If you walked into a daily rental company and rented the same car it could cost up to £200 less per day but to do this you would be expected to pay in advance for the rental.

So as the accident wasn’t your fault why would you take this route, surely it must be down to the other party’s insurance company to pay the rental costs direct? Wrong. If it can be shown in court that that you had the resources to pay for the replacement car at the lower rate the court could find in favour of the insurance company for the difference. And it gets worse, supposing the car was a write off. How long would you be entitled to a Credit Hire car for? Most would assume from the time you had the accident to the time you receive the payout.

Some might argue, but not be successfully, that you need the hire car to drive around to inspect potential replacement cars. However, again, rather bizarrely, if it can be shown that you could have afforded to pay for a replacement you may not be entitled to claim for more than say a ‘reasonable’ 2 weeks. The expression used by the courts is ‘impecunious’ when you don’t have the funds to pay for a replacement in the case of a write off or pay for cheaper daily rental if your car is being repaired. So beware if you have a few quid in the bank.

Finally, there is the ‘upsell’. Only ever consider an upsell if the Credit Hire company doesn’t have a direct replacement and won’t charge a higher rate for the better car. Let’s say your car is a 3 Series BMW but because the Credit Hire company has no 3 Series available they suggest they provide a 5 Series. Check that they will still charge the 3 Series rate and don’t fall for the supplier saying that you don’t have to worry if the rate is higher as the other party’s insurance company will be paying.

They probably won’t. In summary only take a Credit Hire car if you are absolutely confident that it won’t result in you paying all or part of the bill. For your information you can check Nationwide Credit Hire Rates by clicking here. Incidentally to put this into perspective Zamir’s Credit Hire charge was over £6,000!!! By Graham Hill