Private Car Share Contract
May 7, 2006 4:21 PM Subscribe
I'd like to set up a private car share arrangement with a friend, or a stranger, and I'd like to set up an actual written contract.
I haven't owned a car in years and don't envision getting one anytime soon, due to budget restrictions and general disinterest. I live in a large city in Texas. I have slim hopes that a commercial car share operation (like flexcar, zipcar, etc...) is going to make it here anytime soon. I know this because I've called these companies and none are expanding into Texas as far as I can tell.
Life without a car is fine, except when I want to escape the city to go camping or when I want to visit my parents, who live an hour outside of the city, far from any public transportaion.
I've rented a car before, but I'd really like to go camping or exploring outside the city at least twice a month, and renting a car doesn't seem cost-effective to me.
I have a friend who also doesn't own a car. If he's agreeable, I propose to do the following:
1) buy a used car together, at an agreed-upon price (say, less than $3000 total), with the idea that it would be paid for entirely and there would be no monthly car payments.
2) put both our names on the insurance policy and split that cost up front.
3) create a bank account in both our names where we each make monthly deposits, at an agreed amount, to build up an emergency maintenace fund and to pay for future insurance costs.
4) we agree in advance on a mechanic to use for needed repairs and/or preventative maintenance.
5) we each can use the car two weeks out of the month, on a rotating basis. We schedule the use a week in advance.
6) the gas tank must be full when the car is delivered to the other person.
7) at any time, if one person no longer cares to participate, the other agrees to buy him out, and will pay them their portion of the purchase price and half of the money in the maintenance/insurance fund.
If my friend's not interested, I thought about maybe posting an ad on my local Craigslist.
Any thoughts on other things to include in such a contract? Any thoughts on the likelihood of this working?
I haven't owned a car in years and don't envision getting one anytime soon, due to budget restrictions and general disinterest. I live in a large city in Texas. I have slim hopes that a commercial car share operation (like flexcar, zipcar, etc...) is going to make it here anytime soon. I know this because I've called these companies and none are expanding into Texas as far as I can tell.
Life without a car is fine, except when I want to escape the city to go camping or when I want to visit my parents, who live an hour outside of the city, far from any public transportaion.
I've rented a car before, but I'd really like to go camping or exploring outside the city at least twice a month, and renting a car doesn't seem cost-effective to me.
I have a friend who also doesn't own a car. If he's agreeable, I propose to do the following:
1) buy a used car together, at an agreed-upon price (say, less than $3000 total), with the idea that it would be paid for entirely and there would be no monthly car payments.
2) put both our names on the insurance policy and split that cost up front.
3) create a bank account in both our names where we each make monthly deposits, at an agreed amount, to build up an emergency maintenace fund and to pay for future insurance costs.
4) we agree in advance on a mechanic to use for needed repairs and/or preventative maintenance.
5) we each can use the car two weeks out of the month, on a rotating basis. We schedule the use a week in advance.
6) the gas tank must be full when the car is delivered to the other person.
7) at any time, if one person no longer cares to participate, the other agrees to buy him out, and will pay them their portion of the purchase price and half of the money in the maintenance/insurance fund.
If my friend's not interested, I thought about maybe posting an ad on my local Craigslist.
Any thoughts on other things to include in such a contract? Any thoughts on the likelihood of this working?
Response by poster: WCity Mike:
I agree with you on point #7. I've also considered agreeing to sell the car and split the profit if ever one of us decides to quit the deal.
posted by Meggers_75 at 5:11 PM on May 7, 2006
I agree with you on point #7. I've also considered agreeing to sell the car and split the profit if ever one of us decides to quit the deal.
posted by Meggers_75 at 5:11 PM on May 7, 2006
I think you might want to check with a lawyer to see how much time the review of such a contract would entail and how much it would cost.
If you were buying a Lexus this might make sense, but for $3,000 in capital expenditures, it seems a little bit of overkill.
Have you heard of Zipcar? The New York Times has a series of articles (I think they also mention competitors) but they're all old so you'd have to pay for them.
posted by jhscott at 5:11 PM on May 7, 2006
If you were buying a Lexus this might make sense, but for $3,000 in capital expenditures, it seems a little bit of overkill.
Have you heard of Zipcar? The New York Times has a series of articles (I think they also mention competitors) but they're all old so you'd have to pay for them.
posted by jhscott at 5:11 PM on May 7, 2006
My experience is that if you're not taking a car very far and plan in advance, it's possible to get rental cars at rates in the $20-$30 a day range.
Do this for three days, once a month, and you'll probably be staying under what insurance alone would be, without the hassle of your agreement.
But... if that doesn't sound appealing to you and the economics of ownership don't work out... I'd actually think your plan could work. I've had insurance before where they asked if I had any roomates. When I did have roomates, they told me that I had two choices: either add them to the policy and pay extra, or have them sign waivers saying they would never drive my car (Progressive was the most insistent on this point).
While I thought it was ridiculous at the time, this says to me that insurance companies are perfectly aware that people may have car-sharing arrangments that have nothing to do with business, marriage, or blood, and are happy to let you carry out such an arrangement if you're willing to pay for it.
Anyway, my guess is that insurance and liability are the places you're going to run into the most practical tangles (other than the actual social sharing of the car). Call the insurance companies first and see if they'll play, check with your state insurance office and even a lawyer, if you can afford it, to make sure that this doesn't expose you to horrendous liability problems.
posted by namespan at 5:26 PM on May 7, 2006
Do this for three days, once a month, and you'll probably be staying under what insurance alone would be, without the hassle of your agreement.
But... if that doesn't sound appealing to you and the economics of ownership don't work out... I'd actually think your plan could work. I've had insurance before where they asked if I had any roomates. When I did have roomates, they told me that I had two choices: either add them to the policy and pay extra, or have them sign waivers saying they would never drive my car (Progressive was the most insistent on this point).
While I thought it was ridiculous at the time, this says to me that insurance companies are perfectly aware that people may have car-sharing arrangments that have nothing to do with business, marriage, or blood, and are happy to let you carry out such an arrangement if you're willing to pay for it.
Anyway, my guess is that insurance and liability are the places you're going to run into the most practical tangles (other than the actual social sharing of the car). Call the insurance companies first and see if they'll play, check with your state insurance office and even a lawyer, if you can afford it, to make sure that this doesn't expose you to horrendous liability problems.
posted by namespan at 5:26 PM on May 7, 2006
Best answer: With insurance, "roommates" in namespan's story is the issue. It's very little trouble (expense varies) to add people who share your address to a policy. It's very expensive to add people who don't (I was on my ex's policy--once the insurance found out I didn't live with him, he was given a choice to drop me from the policy or pay double--and we were still legally married at the time).
posted by Cricket at 6:01 PM on May 7, 2006
posted by Cricket at 6:01 PM on May 7, 2006
Something you might want to consider is how much you can grow accustomed to using a car when one is available. By this I mean that you and the other owner might end up both wanting the car more often than you currently think you will. I hope that makes sense :)
posted by homer2k1 at 6:02 PM on May 7, 2006
posted by homer2k1 at 6:02 PM on May 7, 2006
It sounds like to me the major motivation for doing this is to save money, but it also seems to me like you really won't be saving that much money. You'll still be on the hook for the full cost of insurance, regardless of how often you drive it. (And potentially you might have to pay a lot more than the standard rates if you have two people that aren't roommates on the policy.) And since you plan to buy this car used you will still be out the up-front cost of half of the car. Wouldn't it be a lot simpler just to purchase a $1500 beater for yourself, and forget about all the scheduling and legal issues regarding sharing it?
I could see this working if the co-owner was a close friend (and skipping all the legal formality) but a stranger? I don't think I would ever consider such a thing, myself.
Of course, you have to be mindful of what homer2k1 mentioned about getting accustomed to driving everywhere.
posted by Rhomboid at 6:36 PM on May 7, 2006
I could see this working if the co-owner was a close friend (and skipping all the legal formality) but a stranger? I don't think I would ever consider such a thing, myself.
Of course, you have to be mindful of what homer2k1 mentioned about getting accustomed to driving everywhere.
posted by Rhomboid at 6:36 PM on May 7, 2006
Rhomboid is right.
1)For starters, $3000 isn't much of a car. It's an old car for which there is no reason to pay for collision insurance, just get liability insurance. If the car gets whacked, they're just going to give you book value -- which is undoubtedly below the $3000 you paid. So insurance costs are going to be minimal and not really the issue here.
2) Why would someone who wants out of the deal pay 1/2 of the original purchase price. The car will have depreciated even further over time as you two use it.
3)This is going to be nothing but a hassle -- especially with a stranger.
In short, just buy a cheap car yourself and be done with it.
posted by bim at 8:11 PM on May 7, 2006
1)For starters, $3000 isn't much of a car. It's an old car for which there is no reason to pay for collision insurance, just get liability insurance. If the car gets whacked, they're just going to give you book value -- which is undoubtedly below the $3000 you paid. So insurance costs are going to be minimal and not really the issue here.
2) Why would someone who wants out of the deal pay 1/2 of the original purchase price. The car will have depreciated even further over time as you two use it.
3)This is going to be nothing but a hassle -- especially with a stranger.
In short, just buy a cheap car yourself and be done with it.
posted by bim at 8:11 PM on May 7, 2006
Response by poster: I had never considered that insurance for people living at two different addresses would be an issue. That certainly something I'll look into. Thanks for all the feedback.
posted by Meggers_75 at 8:23 PM on May 7, 2006
posted by Meggers_75 at 8:23 PM on May 7, 2006
You'll still be on the hook for the full cost of insurance, regardless of how often you drive it.
More than that, is the potential to be on the hook for the consquences of an accident. Would both of you get points if either is in an accident? And what about liability in excess of policy limits? When a policy doesn't cover all the damages, usually the insured can be sued for their personal assets -- in this situation would it be possible that one of you could be sued over the other's accident? Gah. If either of you has assets, that's the kind of thing to find out now. Oh, and if your insurer can find the slimmest justification to call this arrangement "car for hire", more yuckiness.
Also, if one has an accident, your joint insurance rate is going to go up -- good to plan in advance how to split an increase fairly. Saves on friendship-damaging arguments later.
Just rent. You can easily get ~$25/day total if you reserve in advance, don't do airport pickup (big surcharges), take possession on their low-volume day (probably Thursday), and use one of the bazillions of credit cards that offer rental car insurance waiver. Join the frequent renter program, and/or AAA, and the prices drops more.
posted by nakedcodemonkey at 8:27 PM on May 7, 2006
More than that, is the potential to be on the hook for the consquences of an accident. Would both of you get points if either is in an accident? And what about liability in excess of policy limits? When a policy doesn't cover all the damages, usually the insured can be sued for their personal assets -- in this situation would it be possible that one of you could be sued over the other's accident? Gah. If either of you has assets, that's the kind of thing to find out now. Oh, and if your insurer can find the slimmest justification to call this arrangement "car for hire", more yuckiness.
Also, if one has an accident, your joint insurance rate is going to go up -- good to plan in advance how to split an increase fairly. Saves on friendship-damaging arguments later.
Just rent. You can easily get ~$25/day total if you reserve in advance, don't do airport pickup (big surcharges), take possession on their low-volume day (probably Thursday), and use one of the bazillions of credit cards that offer rental car insurance waiver. Join the frequent renter program, and/or AAA, and the prices drops more.
posted by nakedcodemonkey at 8:27 PM on May 7, 2006
What you could do is before and after each ride write down the odometer. Save the receipts of filling the gas pump. At the end of the month you can each pay gas in proportion of the kilometers used.
posted by Sharcho at 9:18 PM on May 7, 2006
posted by Sharcho at 9:18 PM on May 7, 2006
If you decide to go through with this, for your buy-out provision, consider what is known as a "high noon" clause.
If one person wants out of the arrangement, then he names his price. The other person has the choice of paying the price or being bought out at that price. It forces you to choose a fair price because you either receive it or pay it.
posted by MrZero at 7:04 AM on May 8, 2006
If one person wants out of the arrangement, then he names his price. The other person has the choice of paying the price or being bought out at that price. It forces you to choose a fair price because you either receive it or pay it.
posted by MrZero at 7:04 AM on May 8, 2006
I could be misinterpreting, but it seems like if person A decides they don't want the car, it's on person B to come up with enough cash to buy them out? That doesn't seem fair. If you have to keep around enough savings to buy your buddy out if he bails, then why not just get your own car?
also, yeah. $3000 is going to buy you... not much.
posted by elisabeth r at 7:42 AM on May 8, 2006
also, yeah. $3000 is going to buy you... not much.
posted by elisabeth r at 7:42 AM on May 8, 2006
This is a bad idea, for a number of reasons.
Probably the worst is that, if your unknown partner gets drunk and plows your car through a crowd of people in front of a bar, there may be implications for you in terms of the cost of future liability insurance, and possibly even legal liability. (I actually doubt you could even get an insurer to underwrite this kind of nonsense.)
Your idea also doesn't take into account what happens if the car is totally trashed. As has been said above, comp insurance is a really bad deal for such a cheap car, as it won't cover anything like the $3K you paid for it; if your buddy wrecks your car, you may simply be out a large amount of money.
In addition, you may be someone who takes care of their possessions. If your partner's standards are lower - he likes to go off-roading, or to transport diarrhetic dogs, or to discard used condoms in the back seat; or if he views a dented fender as 'no big deal', you are in a bad place. Another way to look at this is that you are reducing the incentive to take good care of the car, because for every $X of damage your partner inflicts on the car, he is liable for only $X/2 of the cost of repairs.
Finally, opening a joint bank account with a stranger is a goddamn fool thing to do. Would you sign every check in your checkbook, then hand it to a stranger and say, "Here, do just as you wish?" Because your plan includes exactly this. If your partner is even the least bit unscrupulous, you could wind up being fucked out of everything you own, plus as many tens of thousands of dollars in overdrafts as your bank is willing to cover. Here is how: if your credit is good, they'll be only too happy to sign your partner up for as much overdraft protection as your credit limit suggests. Then, he writes a check for that amount, has his girlfriend cash it, and splits town. You're left holding the bag - and accruing interest at 23% compounded daily.
posted by ikkyu2 at 7:49 PM on May 8, 2006
Probably the worst is that, if your unknown partner gets drunk and plows your car through a crowd of people in front of a bar, there may be implications for you in terms of the cost of future liability insurance, and possibly even legal liability. (I actually doubt you could even get an insurer to underwrite this kind of nonsense.)
Your idea also doesn't take into account what happens if the car is totally trashed. As has been said above, comp insurance is a really bad deal for such a cheap car, as it won't cover anything like the $3K you paid for it; if your buddy wrecks your car, you may simply be out a large amount of money.
In addition, you may be someone who takes care of their possessions. If your partner's standards are lower - he likes to go off-roading, or to transport diarrhetic dogs, or to discard used condoms in the back seat; or if he views a dented fender as 'no big deal', you are in a bad place. Another way to look at this is that you are reducing the incentive to take good care of the car, because for every $X of damage your partner inflicts on the car, he is liable for only $X/2 of the cost of repairs.
Finally, opening a joint bank account with a stranger is a goddamn fool thing to do. Would you sign every check in your checkbook, then hand it to a stranger and say, "Here, do just as you wish?" Because your plan includes exactly this. If your partner is even the least bit unscrupulous, you could wind up being fucked out of everything you own, plus as many tens of thousands of dollars in overdrafts as your bank is willing to cover. Here is how: if your credit is good, they'll be only too happy to sign your partner up for as much overdraft protection as your credit limit suggests. Then, he writes a check for that amount, has his girlfriend cash it, and splits town. You're left holding the bag - and accruing interest at 23% compounded daily.
posted by ikkyu2 at 7:49 PM on May 8, 2006
>I've rented a car before, but I'd really like to go camping or exploring outside the city at least twice a month, and renting a car doesn't seem cost-effective to me.
A couple of people have mentioned that renting is not as expensive as you suggest. Perhaps you have not tried such companies as Ugly Duckling or Rent-A-Wreck. Just about any car dealer will have similar items available.
posted by megatherium at 5:28 AM on May 9, 2006
A couple of people have mentioned that renting is not as expensive as you suggest. Perhaps you have not tried such companies as Ugly Duckling or Rent-A-Wreck. Just about any car dealer will have similar items available.
posted by megatherium at 5:28 AM on May 9, 2006
This thread is closed to new comments.
posted by Mr. Gunn at 5:04 PM on May 7, 2006