How much should I charge someone to borrow my car?
The costs of lending your vehicle
Lending your car to friends or family members can seem like an easy favor, but there are real costs involved that you should consider before handing over the keys. As the owner of the vehicle, you are taking on all the risk of potential damage, accidents, or other issues that could arise when someone else is driving your car. When deciding how much to charge for borrowing your car, here are some of the main factors to take into account:
Wear and tear
Every mile driven in your car adds wear and tear and brings you closer to needing repairs or maintenance. The industry standard is around $.55 per mile to account for this normal degradation of the vehicle. If you estimate how many miles will be added by the borrower, you can get a baseline number for this cost.
Gas and oil
Will the borrower fill up the gas tank and check the oil when they are done? If not, you’ll want to factor in the cost of a full tank of gas and potential oil changes resulting from their mileage. Estimate the vehicle’s gas mileage and how far they are likely to drive it.
Your insurance rates are based on your driving history and profile. Lending your car to another driver adds substantial risk in terms of potential claims. Check with your insurance provider on whether your policy covers secondary drivers, and what the ramifications are for allowing other people to drive the vehicle. You may need to add a temporary driver or change your policy terms.
Loss of use
When your car is borrowed, you are losing the ability to drive it yourself for errands, appointments, work commute, etc. Calculate the costs you might incur for transportation, ride sharing, car rentals, or missed time due to not having your vehicle available. This is an often overlooked but very real cost of lending it out.
Cleaning or repairs
No matter how careful the borrower promises to be, there is always a possibility of your car being returned dirty or even damaged. Take into account the time/costs of returning it to its previous condition in terms of cleaning or repairs after it is borrowed. You can use average costs of professional detailing or body work to estimate a reasonable buffer for this risk.
Factors that impact the borrowing fee
When you have a general sense of the potential costs involved, you can then consider specific factors that might allow you to charge more or less for lending your vehicle:
Type of car
The make, model, age and market value of your car will impact the fee to some extent. If you have a brand new luxury vehicle vs. an older model economy car, the rates could be quite different based on the overall value and transportation needs being met. Sports cars or specialty vehicles would also warrant a higher fee in most cases.
Duration of the loan
Are you lending your car for a quick errand or a 1-week road trip? The longer someone borrows your car, the higher your costs will be in the various categories above. Charge an amount that correlates to the total days/miles the car will be borrowed for.
Relationship to the borrower
You may offer family members or very close friends a more generous rate or waiver of certain fees – it’s your discretion based on the relationship. But for co-workers, neighbors or other acquaintances, the borrowing rate should cover your actual costs.
Reputation of the borrower
Have they borrowed vehicles responsibly in the past without incident? Or do they have a questionable driving history or record of vehicle care? Factoring in what you know about their reputation can allow you to assess if they are higher or lower risk.
Purpose of the trip
The reason someone is borrowing your car will also impact the risk level. Quick local errands vs. a long highway road trip can determine the chances of excess mileage, gas usage or potential accidents.
Coverage and permissions
Will the borrower be specifically named on your insurance to be fully covered during this period? Or will they need to provide their own coverage? Sort out all policy permissions and restrictions before lending to reduce your liability.
Condition of the car
If your car is older and has existing wear, dings or issues, you may want to charge less than for lending out a car that is brand new or has perfect condition. The impact of minor damage is less on a high-mileage or used vehicle.
Calculating the fee
With all of these factors weighed, here are some guidelines for arriving at a fair borrowing fee:
Start with a baseline
Use the standard mileage rate of approximately $.55 per mile as a starting point. Estimate the total miles expected to be driven and multiply that by $.55.
For example: Friend borrowing car for a weekend trip = estimated 200 miles 200 x $.55 per mile = $110 baseline fee
Add gas costs
Factor in the cost of a full tank of gas for the distance/vehicle. This covers the gas needed for their trip.
For example: Your SUV has a 20 gallon tank and gets 20 mpg. For a 200 mile trip, they would use about 10 gallons. At $4 per gallon, that's $40 of gas to add to the fee.
Include “pain and suffering”
To account for your loss of use, cleaning, risk factors and overall inconvenience, add 25% or more on top of the baseline totals above. This captures the subjective costs and hassle of lending your vehicle.
In the example above, 25% of $110 is $27.50. So the final rate for a 200 mile weekend trip would be: Baseline mileage fee: $110 Gas usage: $40 "Pain/suffering:" $27.50 Total fee: $177.50
This provides a reasonable rate that covers your measurable out-of-pocket costs as well as compensates you for the general hassle of lending your vehicle. Keep in mind the final rate can scale up or down based on the factors like vehicle type, trip duration, borrower reputation etc.
Put it in writing
Once you’ve settled on a fair rate for lending your car, document it clearly in writing. Draft a simple agreement that states:
- Name of primary driver
- Dates of vehicle loan
- Approved mileage (if applicable)
- Borrowing fee amount
- Payment terms and timeline
- Who is responsible for gas fill ups?
- Any policies on smoking, pets, condition, damages, etc.
By formalizing the terms in writing, it reduces any potential misunderstandings and holds the borrower accountable. Both parties should sign the document to acknowledge the agreed-upon costs and usage policies.
Exchanging keys only after the agreement is signed – and collecting payment at the end of the loan term – keeps the transaction professional.
Alternatives to lending your own vehicle
If you are uncomfortable with lending out your car, even with an agreement and fee in place, there are alternatives to consider:
- Refer them to a rental car company – Let them rent a vehicle that is insured for their usage needs rather than risking your own car. You can offer to chip in on the rental costs if you want to help them out.
- Cover their transportation costs – Instead of turning over your keys, you could pay for their ride shares, taxis or public transportation during the time they need a vehicle.
- Connect them to other borrowers – If someone else you know may be open to lending their car, connect the borrower to those potential sources rather than offering your own.
- Gift cards for gas/maintenance – If you want to help with their transportation needs but not lend the car, give gift cards to cover gas, oil changes or other auto expenses.
While lending your car can seem like no big deal, it represents a real risk and cost that should be appropriately compensated. By following the tips above and using a clear written agreement, you can make the process smooth and mutually beneficial for both parties.
Frequently Asked Questions
How much should I charge friends vs. acquaintances to borrow my car?
For close friends you can decide to charge a lower rate as a favor, but it’s wise to still charge something to cover basic costs. For co-workers, neighbors or other acquaintances, charge the standard rate based on mileage, gas and inconvenience costs. Don’t subsidize other drivers if there is not a close relationship.
Can I accept partial payment from the borrower?
Yes, you can set up a payment plan if needed. Get a deposit upfront, then collect the remainder by the date you specify in the agreement. Make sure payment terms are clear in writing.
What if the borrower causes damage?
That risk is why a complete written agreement is essential. It should state the borrower is responsible for any damage, cleaning needed or mechanical issues arising from their usage. Require a security deposit if you have concerns, and use it toward repairs if damage occurs.
What if the borrower drives more miles than agreed upon?
Stick to the terms in your written agreement, and charge any overage miles at the standard per-mile rate you set. This is why estimating mileage upfront and putting it in writing is key to avoiding surprises.
Is it enough to just have a verbal agreement?
No, always put the terms in writing and have it signed by both parties. A formal document protects you if disagreements arise later. Verbal agreements become a “he said, she said” situation quickly.
Should I ask to see the borrower’s driver’s license and insurance card?
Absolutely – you need to verify they have a valid license and current insurance that will cover them driving your vehicle. Check both documents closely before handing over your keys.
What if the borrower gets in an accident with my car?
Review your insurance policy and the agreement terms regarding liability. Often your insurance will cover your car with a deductible, but it depends on your specific policy terms. Require a large enough fee/deposit to cover your potential out-of-pocket costs if an accident occurs.