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What is Demurrage?

What is Demurrage?


Although demurrage was and is a shipping term, thanks to adaptation by UK Car Rental Companies this concept is now also used to help in the recovery of costs for the victims of road traffic crashes.

What this basically means is that where the party at fault is insured, it is possible to recover your car rental costs from them or their insurance company. This can be real handy to know if your own private car is involved in an accident where the other party is fully at fault. Why not have a rental car paid for by the other party’s insurance company, while your car is off the road being repaired?

Being without your vehicle can be a significant problem and extremely frustrating, especially where you are not a fault for the damage to your car. A lot of us rely on our motor vehicles to function efficiently in today’s world. This is especially so where your car is essential to get to work to earn a living.

Car Rental Demurrage

Loss of use and down-time due to a fleet vehicle being damaged is also a significant and serious issue for Car Rental companies. They too need their vehicles to be roadworthy and available (to hire) to make their income. Consequently, where possible they need to also charge Demurrage where one of their fleet cars is damaged and off road and unable to earn them a living.

Some Insurance Companies claim they will cover this cost,and some will try and avaoid paying it saying it is not their policy. However insurance companies usually claim they require the car rental company to prove they needed that vehicle for hire purposes and didn’t have any other vehicle that could be hired out in place of the damaged vehicle.

It is important to note however, that the car rental company is NOT legally obliged to provide such details to another company. Such information on utilisation of its fleet is proprietary information and generally considered commercially sensitive and private. The fact always remains that the hire company always has the vehicle unavailable for income making purposes (hire) while it is off the road being repaired or awaiting the decision making processes of insurance companies.

Such demands from various insurers, for 'utilisation' figures, fail to take into account the fact that although a car rental company may well have other vehicles available during a period where one of their fleet is damaged and unavailable for hire; that does not mean to say that the vehicles that are still available will suit the customers’ needs in the way the damaged vehicle would have done. In other words, the car rental company may well lose out on income as a result of having that particular vehicle unavailable for hire. This is especially true with smaller car rental companies where they have fewer multiples of any particular make and model available for hire at any one time.

Demands from insurance and credit card companies for a car rental company’s utilisation figures are frequently seen as an attempt to find a way out of paying that portion of the costs involved with an accident or theft. At the very least, these demands can slow up resolution of a claim and may ultimately result in demurrage costs being charged directly to the customer in circumstances where payment of these costs is refused, delayed or minimised by the insurance company.

Then there's also the matter of storage of for a damaged vehicle. Storage can be very costly for a car that's not earning revenue. Is that cost covered by the insurance company?

Whether the rental vehicle is on hire or damaged, the rental car companies are still paying to purchase or lease that vehicle. They also have the ongoing costs of registration and insurance on the vehicle, which in Queensland at least are much higher than for a private vehicle. It is therefore to be expected that where a customer takes on responsibility for a hire vehicle, that demurrage costs will be charged where the vehicle is damaged and off road for repairs. Surely this is another very good reason to reduce your liability when hiring a rental car.

Posted By ken

Updated : 4th February 2023 | Words : 700 | Views : 26269 | Comments : 5

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