Key Takeaway
Rate is the single most disputed element in Australian credit hire claims. The High Court in Arsalan v Rixon confirmed that hire charges must be reasonable but gave no framework for assessing what "reasonable" means. The result is a patchwork of state-by-state approaches, with NSW and SA favouring the lowest market rate and other jurisdictions taking a less consistent view.
1. The Core Problem
You could get the vehicle selection right, the hire period right, and the documentation perfect, and still lose the argument on rate.
That's the reality of credit hire litigation in Australia. Rate disputes account for the majority of contested claims, and the gap between what credit hire companies charge and what insurers are willing to pay remains significant.
In the McKnight v Miller case, for example, Compass Corp charged $95.88 per day for a Toyota Corolla. RAC Insurance assessed the reasonable rate at $45.33 per day, based on comparative market quotes. That's a 112% difference on the same vehicle for the same period.
The fundamental question hasn't changed since before Arsalan. What rate of hire is the claimant entitled to recover from the at-fault party?
2. What the High Court Said (and Didn't Say) About Rate
In Arsalan v Rixon [2021] HCA 40, the High Court confirmed that a third party can recover the reasonable cost of hiring a broadly equivalent vehicle. The Court acknowledged that there may be cases where the quantum is unreasonable.
That's where the guidance ends.
The Court did not specify what method courts should use to determine reasonableness. It didn't say whether the lowest rate, the median rate, or some other benchmark should apply. It didn't address whether credit hire premiums are legitimate components of a recoverable rate.
As Magistrate Darge observed in the original McKnight v Miller hearing: "The mechanics of determining the core issues needed to assess damages were not defined by the High Court and remain open for determination."
3. Two Competing Frameworks
In practice, two approaches have emerged across Australian courts.
Approach 1: Bottom of the Range This view holds that the reasonable rate is the lowest available market rate for a broadly equivalent vehicle. The logic is that a prudent person spending their own money would shop around and choose the most affordable option. Any premium above this is either a credit hire surcharge or an unjustified excess.
This is the dominant approach in NSW and SA, and it mirrors the UK position under the Stevens v Equity line of authority where the Basic Hire Rate (BHR) is determined at the bottom of the market.
Approach 2: Reasonableness of the Actual Rate This view holds that the question isn't "what is a reasonable rate?" but rather "was the rate actually charged unreasonable?" The distinction matters. Under this framework, the burden falls on the defendant (typically the insurer) to prove that the rate charged was unreasonable, not on the claimant to prove it was the lowest available.
This was the approach adopted by Levy DCJ in the District Court appeal of McKnight v Miller [2023] WADC 107, where the Court held the Magistrate erred by trying to determine a reasonable rate rather than assessing whether the claimed rate was unreasonable.
4. State-by-State: Where Each Jurisdiction Stands
The inconsistency across states is one of the biggest challenges for credit hire operators working nationally.
New South Wales The most consistent jurisdiction. The Small Claims Division of the Local Court has applied the bottom-of-the-range approach both before and after Arsalan. Operators should expect rates to be assessed against the lowest comparable market quotes. If your rate is significantly above mainstream rental prices, you'll need strong justification.
South Australia Following NSW's lead. The Magistrates Court held in 2023 that the lowest market rate should be used, and maintained that approach in 2024. South Australia is effectively aligned with the conservative NSW position.
Victoria Less predictable. With multiple judicial officers across multiple registries handling credit hire matters, outcomes vary. Some follow the bottom-of-range approach. Others give more weight to the circumstances of the hire. Operators need to be prepared for either outcome.
Queensland Similar inconsistency to Victoria. The larger volume of claims and judicial officers means there's no single dominant approach. Evidence quality tends to be the deciding factor.
Western Australia The 2025 Court of Appeal decision in Miller v McKnight [No 2] [2025] WASCA 61 has established a clear framework for WA. The Court compared the credit hire rate to mainstream market rates and found the difference was attributable to bundled non-compensable benefits. This decision is binding on lower courts in WA and may influence other states.
Tasmania, ACT, NT Lower volumes of credit hire litigation. Limited case law. Operators should monitor developments in the larger states for directional guidance.
5. The Credit Hire Premium Problem
At the heart of most rate disputes is the "credit hire premium," the difference between what a credit hire company charges and what a standard rental company would charge for the same vehicle.
Credit hire companies argue this premium reflects additional value: the vehicle is provided on credit (no upfront payment), claims are managed on behalf of the customer, repairs are coordinated, legal proceedings are handled, and extras like roadside assistance and zero excess are included.
Insurers argue these are non-compensable benefits, services that benefit the claimant but aren't part of the loss caused by the accident. A reasonable rate, they say, should reflect only the cost of hiring the vehicle itself.
The WA Court of Appeal in Miller v McKnight [No 2] sided firmly with the insurers on this point. It identified five specific non-compensable benefits bundled into Compass Corp's rates: credit provision, claims agency, repair liaison, premium roadside assistance, and legal proceedings management.
If this approach is adopted more broadly, it creates a significant challenge for operators whose pricing models rely on bundled service charges.
6. Evidence That Wins (and Loses) Rate Arguments
Based on the case law, here's what the evidence picture looks like.
Strong evidence for operators: Contemporaneous market rate comparisons from at least 3-4 mainstream rental providers for the same vehicle class and hire period. Transparent breakdowns showing the base hire rate separately from any additional services. Evidence that the rate was communicated clearly to the customer before the hire commenced. Documentation of genuine attempts to keep costs reasonable, including vehicle downgrades where appropriate.
Weak evidence that courts reject: Rates based on non-contemporaneous quotes (i.e., quotes obtained after the hire period, not at the time of hire). Internal rate cards without independent market validation. Bundled invoices that don't separate vehicle hire from additional services. Rates significantly above the market median without clear justification.
Strong evidence for insurers: Market rate surveys showing the claimed rate is above the top of the range. Quotes from 3+ mainstream providers at substantially lower rates. Expert evidence on market rates for the relevant vehicle class and location.
7. Practical Steps for Credit Hire Operators
Given the current legal landscape, here's what operators should be doing.
Price transparently. Separate the base vehicle hire rate from any additional services on your invoicing. If your base rate is competitive with mainstream providers, you're in a much stronger position even if total charges are higher.
Benchmark regularly. Keep contemporaneous evidence of mainstream market rates for the vehicle classes you supply. This should be refreshed at least quarterly and ideally at the time of each hire.
Know your jurisdiction. Don't apply a one-size-fits-all approach across states. Your pricing strategy and evidence package should reflect the specific approach taken by courts in each jurisdiction.
Document vehicle selection. Record why the specific replacement vehicle was chosen, including how it relates to the age, condition, and value of the damaged vehicle. A broadly equivalent vehicle is not necessarily the same make and model.
Prepare for the Miller effect. The WA Court of Appeal decision may be appealed to the High Court, but in the meantime it's the most detailed appellate analysis of credit hire rates in Australia. Even outside WA, insurers will cite it. Be prepared to distinguish your pricing model from the facts in Miller.
Key Authorities
- Arsalan v Rixon; Nguyen v Cassim [2021] HCA 40
- Miller v McKnight [No 2] [2025] WASCA 61
- McKnight v Miller [2023] WADC 107
- McKnight v Miller [2022] WAMAG (Magistrate Darge)
- Patterson v Kenny [2017] WADC 58
CreditHire-Assist is an AI-powered legal assistant built specifically for Australian credit hire professionals. It draws on a curated knowledge base of Australian case law, legislation, and industry practice to support faster, more accurate claims handling.
Co-Founder, CreditHire Assist
Craig has more than thirty years inside credit hire and motor claims, from Glaisyers to AX. He writes about how credit hire actually works in practice, the operational discipline that wins files, and the BHR and intervention arguments that come up week after week.
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