Draft a Carsharing Agreement

When you share a car with someone, you should have a written car-sharing agreement. You need an agreement even if only one of you owns the car. Before drafting the agreement, sit down and discuss when each of you will need to use the car and how you anticipate expenses being shared. An effective car-sharing agreement should be treated like a contract. Make sure to sign it and keep a copy for your records.

Steps

Explaining the Ownership of the Vehicle

1. Title the document. You should title the document “Car Sharing Agreement.” Put the title in bold and center it in the middle of the page.
   • Be sure to use a font size and style which is readable. Times New Roman 12 point is fairly standard.
2. Open with recitals. The agreement begins by identifying the parties and stating that you have an agreement.
   • For example, you can write, “This agreement is between Jane Smith and Michael Jones, who agree to the following.”
   • Include the names of all people who will be sharing the car.
3. Identify the car. You need to properly identify the car by year, model, and Vehicle Identification Number (VIN).
   • If you own the car together, then state, “We agree to share the ownership and use of a 2012 Chevrolet Malibu, VIN#: 12345XXXXXX, (hereafter called ‘the car’).”
   • If you only agree to share (but not co-own) the car, then type, “We agree to share the use of a 2012 Chevrolet Malibu, VIN#: 12345XXXXXX, (hereafter called ‘the car’).”
4. Explain when title is transferred. If you do not already share ownership, then explain when title will be transferred into both owners’ names. If you are only sharing the car and not co-owning it, then you do not need this section.
   • “Within two weeks of signing this agreement, Jane will transfer title to the car from her name to both names, ‘Jane Smith and Michael Jones, as tenants in common.’”
   • You should understand the different forms of ownership. For example, if you own a car as “tenants in common,” then both people will need to sign in order to sell the car. However, if one of you dies, then the other person does not automatically get the other person’s share of the car. Instead, that share passes to whoever is named in a will or whoever is an heir (if there is no will).
   • By contrast, if you own the car in “joint tenancy,” then the other person’s share will automatically pass to you at death. To create a joint tenancy, write “Within two weeks of signing this agreement, Jane will transfer title to the car from her name to both names, ‘Jane Smith and Michael Jones.’”
     • Realize, however, that with a joint tenancy, either owner may sell the car without the other’s permission.
5. State how much you paid for a share of the car. If one of you paid money for a share of the car, then explain how much in the car-sharing agreement. To properly value the car, visit the Kelley Blue Book website and look up the make and model of the vehicle.
   • For example, you can write, “In consideration for a 50% ownership in the car, Michael will pay Jane $6,500, which we agree is half of the car’s Blue Book value.”
6. Identify separate property. Although you might both own the car, you probably don’t own everything inside the car together. For example, one person might pay for a snow shovel, windshield scraper, locking device, etc. You need to clarify in the car-sharing agreement who owns the separate property.
   • You could explain ownership this way: “Both parties agree that the following property will remain Jane’s: the snow shovel and windshield scraper.”
   • You can also clarify that if one of you buys something for the car, it will remain the property of whoever bought it: “Once this agreement has been signed, Jane or Michael will retain ownership of any property they purchase for the car.”

Clarifying How the Car May Be Used

1. Identify where you will park the car. Decide on this ahead of time so that each owner will know where to get the car. You might want to park it regularly at someone’s house or apartment, or in a garage.
   • For example: “We will park the car at Jane’s apartment on Liverstone Drive.”
2. Specify the days you will use the car. Be sure to put in writing the days each owner will use the car. Ideally, you will be as specific as possible so as to pre-empt any disagreement from arising later on.
   • “Jane will use the car Monday through Friday in the morning, from 6:00 am until 11:30 am. Jane will also have use of the car all day Saturday. Michael will use the car Monday through Friday, from 1:00 pm to 7:30 pm. Michael will also have use of the car on Sundays.”
3. Outline what approval is needed for long trips. Inevitably, one of you will want to use the car to take a long trip. You should clarify the approval process. For example, you might require that the other owner give written permission. You could also require the person taking the trip to pay a rental fee.
   • For example, “If one owner wishes to use the car for a trip longer than two days, the person using the car will pay rent, in the amount of $75 a day, for the days the other owner would usually be able to use the car.”
4. Clarify who has authority to make decisions. Car owners must make many decisions regarding their cars, from selling the car to making major repairs. You should clarify who can make decisions. Often, you will want agreement from all owners:
   • “We agree to take part equally in making decisions about the car. Both of us must agree to sell or make expensive improvements or repairs. If we cannot both agree, then we will seek mediation.”
5. Include prohibitions. If you want to prevent the other owner from using the car in a certain way, you should specify. For example, you might want to prevent the owner from doing any of the following:
   • eating or drinking in the car
   • smoking in the car
   • transporting dogs or other animals
   • letting anyone sleep in the car
   • using the car for an illegal purpose

Dividing the Costs of the Car

1. Calculate how costs are divided. There are regular costs associated with a car: registration, maintenance, and repairs. You should clarify how you want to divide the costs. For example, you might want to divide costs equally:
   • “We will divide the cost of registration, maintenance, and repairs equally. Any unforeseen costs will also be divided equally, unless one of us objects. In the absence of agreement, we will mediate the dispute.”
2. Explain who buys gas. You can decide to divide gas in a couple of ways. You might want to divide the cost 50-50, especially where you both drive the car an equal amount. Alternately, you could divide the amount in a lose proportion to how much you drive.
   • You could type, “We will keep receipts for purchases of gas and then divide the amount equally at the end of the month.”
   • Or, you could insert this provision: “Each of us will pay for whatever gas we use. Instead of keeping detailed records, we will try to purchase gas in proportion to the miles we drive. The car gets roughly 25 miles per gallon.”
3. State the details of your insurance policy. You will need insurance on your car, and your car-sharing agreement should explain how you will divide premiums.
   • State who you have a policy with: “We will carry insurance with Allstate.”
   • State the policy details: “Our policy will cover up to $250,000 per victim, $750,000 per accident, and $25,000 for property damage.”
   • Identify in whose name the policy will be listed: “Jane will be listed as the primary driver and Michael will be listed as the secondary driver.”
   • Also explain how you will divide the costs of the insurance: “We will each pay 50% of the insurance premiums. If one of us commits a driving infraction which increases the cost of the insurance, then that person will be responsible for the increase in the premiums.”
4. Include an indemnification provision. This provision is necessary in case one owner gets in an accident. The owner who is at fault should reimburse the other owner for any expenses the other owner incurs. For example, if one owner totals the car, then the other owner may need to take taxis every day to work.
   • Sample language could read: “If one owner is involved in an accident for which he or she is at least partially at fault, then this owner will pay all insurance deductibles as well as indemnify and compensate the other owner for expenses related to the accident which are not covered by insurance. The owner at fault will also cover increases in the insurance premiums. However, if one owner is involved in an accident but is not at fault, then both owners will pay one-half of the deductible and any costs related to fixing the car.”

Finalizing the Agreement

1. Describe the dispute resolution process. Sometimes, the owners cannot agree to something, such as whether to make a major repair. In this situation, you will need to resolve the dispute somehow. Your agreement should state the method, e.g., you will attend mediation.
   • In mediation, you will explain your dispute to a neutral third party, the mediator, who will guide you to a solution you both can accept. Mediation is a good method for resolving disputes, especially where you intend to continue your relationship with the other party.
   • To include a mediation provision, insert language like the following: “Whenever a dispute arises which we cannot solve on our own through discussion, we will attend mediation at the Cook County mediation center.”
2. Explain the process for termination. At some point, one of you might want to terminate the car-sharing agreement. You should explain the process. Typically, termination will involve buying out the other person’s share of the car (if you co-own the car). However, there are other options.
   • “If one of us wants to stop sharing the car, we will consider the following options in order: (1) the other owner will keep the car and pay the departing owner half of the car’s value, according to Kelley Blue Book; (2) the departing owner will keep the car and pay the other owner half of the car’s value; (3) both owners will sell the car and divide the proceeds.”
3. Include a choice of law provision. If you end up going to court, then a court will have to interpret the agreement and order a resolution. You have the power to decide which state’s law you want to apply during the dispute. Generally, most people select the state where they live.
   • You can write, “This agreement shall be governed and construed according to the laws of [insert state].”
4. Add a merger clause. You want to state that the written agreement represents the entire agreement between the parties. This will prevent one of you from later claiming that you also had an oral side agreement which is not in the contract.
   • You should include this merger clause: “This agreement represents the entire agreement. No consent, waiver, modification, or change of terms shall be binding unless in writing and signed by both parties. There are no agreements, understandings, or representations, either oral or written, not specified regarding this agreement.”
5. Insert signature blocks. You should include a signature block for each person sharing the car. Include a line for:
   • the date
   • signature
   • name
   • address
6. Sign and date the agreement. To make it more official, you can sign the agreement in front of a notary. Be sure to bring sufficient personal identification to the notary. Typically, a valid driver’s license or passport will suffice.
   • Notaries can be found at most town or city offices, as well as at the courthouse. You can also find a notary near you by using the Locator at the website for the American Society of Notaries.
7. Keep a copy. Make sure that all parties to the agreement keep a signed copy. You can refer to it later on if a disagreement arises.

Tips

• Before signing the agreement, it could be helpful to have an attorney review it. A qualified lawyer might catch something that needs to be revised.

References

See also

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• Collect Car Repossession Deficiency
• Start a Rideshare Campaign in Your Neighborhood
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• Take a Ride in Ridingo (India)
• Be Legally Covered When Operating a Carpool Service
• Avoid License Suspension for Refusing Chemical Test in Michigan
• Find the Owner of a Vehicle
• Book a Sienna on Voombus
• Use GoGoGrandparent

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