Advice for loaning car to a friend?

[frugalcalan]

I have a car.  And I used it... three?  Four times a month?  Basically, pretty infrequently.  I take my bike almost everywhere, and every once in a while I'll take public transit.  I live in Chicago, so it isn't that hard.  But every once in a while there's somewhere I need to get to by car (I've got a couple of friends who live in the suburbs, and every once in a while I'll visit an out of town friend over the weekend).  I've been thinking about leaving it at my parent's place when I visit for Christmas.  I don't use it much, and so the car insurance + occasional ticket (I get free street parking, but the city can be very last minute with its "move your car because street" cleaning signs, and so it's easy for me to miss because I don't check every day) really is not making my car affordable, so I was thinking about getting a zipcar subscription instead.  But I really am not ready to completely ditch the wheels.

One of my best friends in Chicago has the opposite predicament.  He just accepted a new job offer, and he's thinking about buying a car for it.  There's no good way to get there by transit, and he doesn't want to do a 6 mile winter commute.  So he's been thinking about buying a car, but really doesn't want to deal with the hassles of car ownership.  Currently he has a zipcar subscription, but that's not feasible for commuting.

We are both fond of the idea of me loaning my car out to him.  He would use it to commute, but I would still be welcome to use it when needed.  He lives about a 35-40 minute bike ride away from me, which isn't too bad.

There's a few things I obviously need to figure out, like what does my insurance think about me not being the primary driver (I use USAA).  And how much I should charge him.

My insurance is very expensive (yeah, yeah.  Punch in the face.  But I'm super paranoid about hitting someone without medical insurance, and losing all of my stash).  So, assuming the resolution involves me continuing to pay car insurance and maintenence, I was thinking $125 a month.  It's a bit low, but it's money I wouldn't be making anyway, and I'm not really losing out on much, and he's my friend so I don't feel like charging a ton (we are both software engineers, and I'm pretty sure he makes quite a bit more than me, so I have no desire to lend it for free).  Basically, I want the amount to be worth the inconvenience/risk for me, but not so high that he'd be better off leasing/buying a car.

There is no car loan to pay off; it was a gift from my parents.  2009 Toyota Scion, xD, if it matters.

Neither of us knows shit about cars.  So I was hoping someone here would have advice on the most fair price to charge in this situation.

[Paul der Krake]

A good starting point is the federal mileage rate to calculate the expenses of operating a car, currenty at around 55 cents, but this includes the price of gas, which your friend should probably be paying for.

I'd charge him either by usage, or a flat fee that would somehow average the expected usage.

[PJ]

Congrats for thinking of such a creative solution to a problem that you both have!  Seems hard to suggest an exact dollar amount, but I agree with thinking along the lines of Paul der Krake - federal mileage rate takes into account the cost of gas, insurance, wear and tear, etc.  Replacement of brakes and tires and several other things are pretty much directly proportional to how much the car is used.  So what you charge should probably reflect mileage to some degree, not just insurance costs.

[frugalcalan]

Thanks for the advice thus far!

Here's the email I have drafted up:

---------------------

So, I looked at a blog I like, and came up with this calculation of car costs per mile:

Car depreciation: 5¢
Tires: .6¢
Oil: .5¢
Misc (wiper blades, maintenance, etc): 1¢ (and that's by a very frugal person.  I'm an idiot about cars so I'll probably end up overspending, but whatever)

So that comes out to 7.1¢ per mile of non-gas/insurance car expenses.

You said work was 6 miles away?  There's about 22 work days in a month.  22 * 12 *.071 = ~19 a month.

I just called my insurance company (USAA).  Since you would be the primary driver, they suggest that you get your own insurance policy (and get me listed as an "occasional driver" or something like that, I don't know if getting me officially listed is necessary).  And then I would get some "liability coverage" through USAA, which would be $25 a month.  So, if you handle your own insurance, I'm thinking $75 a month (wear and tear + liability coverage + a couple of CTA passes to get up to your place so I can borrow the car + a couple bucks extra) seems like a pretty reasonable situation.  It's cheaper than a 30-day CTA pass (especially since they are raising the price to $100)

Thoughts?

---------------------------------------

[Russ]

So your friend would be getting his own insurance, paying for gas, and paying you $75/month on top of that? That sounds reasonable, especially if your insurance company wants him to get his own insurance, which complicates the per-mile expenses.

[bogart]

I think your insurance company is likely to have strong, and perhaps complicating (to your plans) ideas about your engaging in what is basically an ongoing rental of your vehicle, regardless of whether you continue to have access to it (drive it) or not.  I'm not saying I think this precludes doing what you're envisioning, which I agree has a lot of positives, but I'd start by speaking with your agent and finding out how they'll handle such an agreement -- its effects on your rates and so forth -- before you do much else.  Good to have accurate information before you start coming up with estimated charges and such.

If your friend can just carry his own insurance, leaving you "as is" in terms of your coverage, that's great.  But I don't know enough to know if that's workable or not.  I know I've been told with my own car that if I lend it to a friend for any given moment -- a drive, a weekend -- that's no problem and I'm covered.  But that if it's an ongoing/regular arrangement, that would be different.  I'm not in your state, so regulations may be different (probably are), but, again, it's worth finding out.

[Nords]

I have a car.  And I used it... three?  Four times a month?  Basically, pretty infrequently.  I take my bike almost everywhere, and every once in a while I'll take public transit.  I live in Chicago, so it isn't that hard.  But every once in a while there's somewhere I need to get to by car (I've got a couple of friends who live in the suburbs, and every once in a while I'll visit an out of town friend over the weekend).  I've been thinking about leaving it at my parent's place when I visit for Christmas.  I don't use it much, and so the car insurance + occasional ticket (I get free street parking, but the city can be very last minute with its "move your car because street" cleaning signs, and so it's easy for me to miss because I don't check every day) really is not making my car affordable, so I was thinking about getting a zipcar subscription instead.  But I really am not ready to completely ditch the wheels.
One of my best friends in Chicago has the opposite predicament.  He just accepted a new job offer, and he's thinking about buying a car for it.  There's no good way to get there by transit, and he doesn't want to do a 6 mile winter commute.  So he's been thinking about buying a car, but really doesn't want to deal with the hassles of car ownership.  Currently he has a zipcar subscription, but that's not feasible for commuting.
We are both fond of the idea of me loaning my car out to him.  He would use it to commute, but I would still be welcome to use it when needed.  He lives about a 35-40 minute bike ride away from me, which isn't too bad.
There's a few things I obviously need to figure out, like what does my insurance think about me not being the primary driver (I use USAA).  And how much I should charge him.
My insurance is very expensive (yeah, yeah.  Punch in the face.  But I'm super paranoid about hitting someone without medical insurance, and losing all of my stash).  So, assuming the resolution involves me continuing to pay car insurance and maintenence, I was thinking $125 a month.  It's a bit low, but it's money I wouldn't be making anyway, and I'm not really losing out on much, and he's my friend so I don't feel like charging a ton (we are both software engineers, and I'm pretty sure he makes quite a bit more than me, so I have no desire to lend it for free).  Basically, I want the amount to be worth the inconvenience/risk for me, but not so high that he'd be better off leasing/buying a car.

Going outside the spreadsheet box for a minute-- what more could it take for you to be ready to ditch the wheels?  You appear to be enjoying minimal benefit (other than convenience) and some significant expenses/hassles.

What about selling the car to your friend for some Kelley/Edmunds price, along with a condition that you'll rent the car from him occasionally for some bargain price like $10/day or a tank of gas?

You eliminate all your hassles in exchange for the loss of convenience.

He gets a car, and perhaps he can insure it more cheaply for himself than you could insure it for him.

In the meantime you'd be putting dozens (or perhaps hundreds) of dollars a month into your own savings for a beater or a moped or some other convenient form of transportation, while having the backup option of renting back your old car.  If nothing else, you could always fall back on a ZipCar or Enterprise.

Perhaps the only obstacle to this arrangement would be your readiness to ditch the wheels.  You seem to be paying a substantial carrying cost for that.

[frugalcalan]

What about selling the car to your friend for some Kelley/Edmunds price, along with a condition that you'll rent the car from him occasionally for some bargain price like $10/day or a tank of gas?

He really doesn't want to own a car.  If he was to buy one, he would probably just get a used one somewhere else (which would give him a lot more options about it).

what more could it take for you to be ready to ditch the wheels?  You appear to be enjoying minimal benefit (other than convenience) and some significant expenses/hassles.

It wouldn't take much.  There is sentimental value in the car.  It was a gift from my parents, so I would feel bad being like, "oh, thanks for this... I'm just going to sell it."  It just feels off the table.  I would certainly be happy to be carless, with a zipcar subscription.

Next October my boyfriend is scheduled to move up here.  One car for one person in Chicago is a bit silly... but one car for two people isn't that absurd.  I prefer my car to his (and I think he does as well), so he would probably sell his, and we would keep mine around.  And if we then decide even that is unnecessary, I'll talk to my parents about what to do with it.  Even though it is registered in my name, and I am responsible for it, etc, it still doesn't feel like it's mine, because I didn't pay for it.  So I really don't feel comfortable just ditching it.

I think your insurance company is likely to have strong, and perhaps complicating (to your plans) ideas about your engaging in what is basically an ongoing rental of your vehicle

Yep, I called them up.  They suggested that he get his own insurance policy.  If we lived in the same household he could do some sort of "co-op" (or something?) insurance, but although I sleep on his couch with some regularity, we don't live in the same place.