When a company car is off the road after an accident, breakdown or service, here's how to keep staff moving: insurer cars, lease cover, hire and VAT.
Every fleet has days when a car is off the road. A minor collision, a breakdown, a warning light or a longer-than-expected wait for parts can take a vehicle out of action for days or weeks. For the business, the cost isn't the repair bill alone. It's the appointments missed and the work that doesn't get done while an employee has no car.
Having a plan for a replacement car before you need one makes those days much easier. This guide explains where a replacement car can come from and who usually pays, including when business replacement car hire is the best option.
Most businesses only think about replacement cars when a driver calls to say their car is undriveable. By then the options are whatever is available that day, booked by whoever picks up the phone. Deciding in advance means you know who arranges the car, what kind of car is suitable, how it's insured and where the cost goes.
It also protects your drivers. A driver without a suitable car may use their own car without business cover, or squeeze a day's work into a vehicle that isn't fit for it.
There are usually four possible sources. Which one applies depends on why the car is off the road and how your fleet is funded.
Many fleet and business motor policies include a courtesy car while a vehicle is repaired after a claim. Terms vary a lot. A courtesy car may only be offered when the repair is done by the insurer's approved repairer, may be a smaller car than the one off the road, and may not be available if the car is written off or stolen. Check your schedule and policy wording now, not after a claim.
If the accident wasn't your driver's fault, the cost of a reasonable replacement car can usually be claimed from the at-fault driver's insurer. This is often handled by an accident management or credit hire company, which provides the car and recovers the cost. Read the agreement carefully before your driver signs, so you know what happens if the claim isn't settled as expected.
If your cars are leased with a maintenance package, a replacement vehicle may be included or available as an option while the car is being serviced or repaired. AMT Leasing's guide to car leasing maintenance explains how maintenance packages and replacement vehicle options work. Note that maintenance packages normally exclude damage repairs, so after an accident it's usually your insurance that applies.
Where none of these covers the gap, or the cover on offer doesn't suit the job, you hire a car directly. For breakdowns, long waits for parts and write-offs that leave a gap before a new car arrives, business hire is often the most practical answer.
It depends on the reason the car is off the road:
Keep a record of why each replacement was needed and who agreed it. It makes any later claim or recharge much simpler.
Not always, but the car has to do the job. A small courtesy car may be fine for an office-based manager making occasional trips. It won't suit an engineer carrying tools and parts, or a sales executive covering several hundred miles a week. Before accepting a replacement, check the size and boot space against what the driver carries, and whether it's automatic or manual if your drivers aren't used to both.
If you're switching to electric, a petrol or diesel courtesy car may cost more to run than the car it replaces. An electric replacement may need charging at home or work, so check the driver can do that.
Not usually, if the normal car is off the road for less than 30 days and the replacement isn't materially better. HMRC's guidance for employers says that when a company car is off the road for less than 30 days, a replacement car isn't charged as a separate benefit, unless the replacement is materially better than the normal car or is provided as part of an arrangement to give the employee a better car (GOV.UK, 480 chapter 12, paragraph 12.35). If a replacement runs for 30 days or more, or is a more expensive car, ask your payroll provider or accountant how to report it.
Usually only half. HMRC says the 50% block on reclaiming VAT applies from the first day when a car is hired to replace an off-the-road company car (HMRC VAT Notice 700/64, section 4.4). The exception for hires of 10 days or less, used only for business, doesn't apply to replacement cars. AMT Rent's guide to VAT and tax on business car hire explains the wider rules.
AMT Rent provides short and long-term business car hire from locations in Leeds, Edinburgh, Birmingham and Welwyn Garden City for London, with corporate plans that scale up or down. It specialises in accident management for business customers, and its network can deliver vehicles within four business hours. See AMT Rent for the range and locations, or read our guide to long-term business rental if a car will be off the road for weeks rather than days.
This article is general information, not legal, tax or insurance advice. Check your own policies and agreements. Sources checked on 23 October 2026: HMRC VAT Notice 700/64, section 4.4; GOV.UK 480 chapter 12, paragraph 12.35; AMT Rent home page; AMT Leasing car leasing maintenance guide.
