Deposits, excess and damage charges: what a UK hire firm can collect

Most hire disputes are about money already held or money still to collect: the deposit, the excess, and the damage charge that follows a scraped bumper. The law does not tell a hire firm how big a deposit to take or what excess to set. It does say how a card hold must behave, how prices must be shown, what makes a damage charge fair to a consumer, and that you cannot add a fee for paying by card. This guide covers each, with every rule linked to its source. It is general information, not legal advice. Where no primary source settles a point, the guide says so and names who to confirm it with.

1. A card hold and a taken deposit are different things

There are two ways to secure a hire. A pre-authorisation hold reserves funds on the customer's card without taking them; at the end of the hire you capture some or all of it, or release it. A taken deposit is a real payment into your account, refunded when the car comes back.

Holds have a legal frame. Where a card payment is initiated through the payee and the amount is not known when the payer authorises it, the payer's bank may not block funds unless the payer authorised the exact amount, and must release the blocked funds without undue delay once it knows the amount of the payment, and in any event immediately after receiving the payment order (Payment Services Regulations 2017, regulation 78). So the customer must agree the hold amount itself, not just the hire price, and once you capture the final sum the rest should drop away.

What the regulations do not set is how long a hold lasts before it lapses. That comes from card scheme rules and your payment provider's terms, and it can differ by card type and merchant category. Confirm the hold period with your payment provider before you rely on it, because a hold placed at pickup for a three-week hire may have expired by the time the car comes back. If it has, you are collecting a damage charge from a customer who has already gone home.

The VAT line in that table comes from HMRC's treatment of security deposits for hired goods, set out in VAT on car hire.

2. Setting the excess, and showing it

The excess is the most a customer pays towards damage or theft under the cover you offer. How high to set it is a commercial decision that follows your own insurance: your policy's excess, what you are prepared to carry yourself, and what you sell to reduce it. Those choices are in insurance for a car hire business. The law cares about how the excess is presented.

• Prominence. The price escapes a fairness assessment only if the term is transparent and prominent; a term is transparent if it is in plain and intelligible language and, if written, legible (Consumer Rights Act 2015, section 64). Every written consumer term must be transparent in that sense (section 68). An excess in pounds beside the daily rate is a stronger term than the same number on page four.
• Total price. An invitation to purchase omits material information if it leaves out the total price, or where it cannot reasonably be calculated in advance, how it will be calculated (Digital Markets, Competition and Consumers Act 2024, section 230). The CMA's guidance says showing a headline price and then introducing additional mandatory charges as the customer proceeds, known as drip pricing, is prohibited (CMA: unfair commercial practices guidance (CMA207)). A compulsory cover charge or fee belongs in the price you advertise.
• Optional extras need a positive yes. No payment beyond the price for the main service is payable unless you obtained the consumer's express consent before they were bound, and consent inferred from a pre-ticked box does not count (Consumer Contracts Regulations 2013, regulation 40). An excess reduction or damage waiver must be something the customer chooses.

3. What makes a damage charge fair to a consumer

A term of a consumer contract that, contrary to good faith, causes a significant imbalance in the parties' rights and obligations to the consumer's detriment is unfair and not binding on the consumer (Consumer Rights Act 2015, section 62). The Act's list of terms that may be unfair includes one requiring a consumer who fails to fulfil their obligations to pay a disproportionately high sum in compensation, one giving the trader the exclusive right to interpret the contract, and one restricting the evidence available to the consumer or putting on them a burden of proof that should lie with the other party (Consumer Rights Act 2015, Schedule 2, paragraphs 6, 16 and 20).

The CMA's guidance on unfair contract terms, CMA37, last updated on 22 July 2026, translates that into practice. Terms are more likely to be unfair if they let the trader claim a fixed arbitrary sum for any breach, all its costs rather than net costs resulting directly from the breach, or compensation twice for the same loss, or if they give the trader excessive discretion over the sum or are vague about it (CMA37, paragraph 6.63). Financial sanctions are more likely to be fair when the sum is objectively proportionate, the circumstances are clear and upfront, and the consumer can easily avoid them (CMA37, paragraph 6.65). Among its examples of terms unlikely to be fair is one making the trader's own signed statement of the damages "conclusive proof" of the loss (CMA37, examples following paragraph 6.67). Your inspection is evidence, not a verdict.

Its closest example to hire concerns a holiday property security deposit, and the logic carries across:

The table paraphrases the CMA's examples (CMA37, examples following paragraph 6.84). Write the charge as a method, not a number you choose afterwards: repair cost from a quote or invoice, capped at the stated excess where the customer's cover applies. These protections are for consumers. For business hirers, ask your legal adviser what governs your terms.

4. Evidence: photos at both ends

Every fair-charge test above turns on evidence. You must be able to show the damage happened during this hire, and the customer must be able to see what you are relying on. A checklist that works in practice:

1. At pickup, photograph each panel, the wheels, the windscreen, the interior, the fuel or charge gauge and the odometer, with the time recorded. Walk the customer round, let them point out anything you missed, and add it before they drive away.
2. At return, take the same photographs from the same angles, so pickup and return can be compared side by side.
3. If something is new, record it while the customer is there if you can, then send the proposed charge with the before and after photographs and the repair quote.
4. Keep the record with the booking for as long as a dispute or claim could follow.

The CMA's example also asks the customer to report existing damage soon after collection. For a car, that is the walk-round at pickup. Out-of-hours key-box returns are where evidence breaks down: if nobody inspects the car until the next morning, say in the agreement how and when the return inspection happens.

5. Collecting after the hire, refunds and disputes

Once the customer has had the evidence and time to respond, collect the charge in the way the agreement described: capture from the hold if it is still live, deduct from a taken deposit, or ask for payment. Glovebox takes deposits at booking, places holds on the customer's card, and adds damage and post-hire charges to the booking for the customer to pay online; the UK features page lists the rest.

Refund timing has no statutory deadline for a dated hire. The 14-day cancellation and refund rules of the Consumer Contracts Regulations do not apply to vehicle rental services where the contract provides for a specific date or period of performance (Consumer Contracts Regulations 2013, regulation 28). That makes your own stated timeline the standard you will be held to, so put one in the agreement: when an unused hold is released, and how many days after return a taken deposit is refunded. How quickly a released hold or refund appears on the customer's statement depends on their bank; confirm typical timings with your payment provider before you quote them.

A customer who disputes a charge may go to their card issuer. This guide does not cover chargeback rules, which are set by the card schemes and applied through your payment provider; ask your provider how disputes work and what evidence they need. Separately, where a consumer pays by credit card for a single item with a cash price over £100 and up to £30,000, a claim against the supplier for misrepresentation or breach of contract can also be made against the card issuer (Consumer Credit Act 1974, section 75). Either way, the evidence pack from section 4 is what answers it.

6. No fee for paying by card

A payee must not charge a payer any fee for payment by a card-based payment instrument that is not a commercial card (Consumer Rights (Payment Surcharges) Regulations 2012, regulation 6A). That covers the hire payment, the deposit and any damage charge. Commercial cards fall outside the ban, but you rarely know which kind a customer is using at the moment they pay, so the workable policy is no surcharge and card costs priced into the rate. The start-up guide's payments section covers the rest of taking money, and the clauses that go with this guide are in the car hire agreement.

The checklist

1. Decide between card holds and taken deposits, and get the customer to authorise the exact hold amount.
2. Confirm with your payment provider how long a hold lasts, and plan for hires that outlast it.
3. Show the excess in pounds next to the price, and include every compulsory charge in the advertised price.
4. Make any excess reduction or waiver an active choice, never a pre-ticked box.
5. Write damage charges as a method: evidence, repair cost, cap, notice, time to respond.
6. Photograph every vehicle at pickup and return from the same angles, and keep the photos with the booking.
7. Publish when holds are released and deposits refunded.
8. Charge no card surcharges, and price card costs into the rate.

Straight answers