How Much Should I Charge Someone to Borrow My Car?

Lending your car to someone introduces financial considerations. Determining a fair charge involves understanding the costs associated with vehicle ownership and use. This ensures you are compensated for wear and tear and potential risks. Calculating these factors establishes a transparent and equitable arrangement.

Calculating Your Expenses

Understanding the true cost of car ownership is the first step in setting a fair rate for lending your vehicle. Fuel costs are a direct and easily quantifiable expense, varying based on the distance driven and current gas prices. To estimate this, calculate your vehicle’s average miles per gallon and multiply the borrower’s anticipated mileage by the current fuel cost per gallon.

Beyond fuel, every mile driven contributes to wear and tear on your vehicle’s components, necessitating routine maintenance and eventual replacements. This includes items such as tires, brakes, and oil changes. The Internal Revenue Service (IRS) annually publishes an optional standard mileage rate for business use, which includes a component for vehicle depreciation and operating expenses like maintenance. For 2025, the business standard mileage rate is 70 cents per mile, with 30 cents per mile specifically allocated for depreciation, offering a benchmark for these combined costs.

Increased mileage also accelerates a vehicle’s depreciation. Consider a small per-mile charge to account for this accelerated depreciation, reflecting the reduction in your car’s resale value. Factor in any specific cleaning or minor maintenance needed after the car is returned. The average cost of owning and operating a new vehicle, according to one estimate, was $0.82 per mile in 2024, assuming 15,000 miles driven annually.

Assessing Risk and Liability

Lending your vehicle involves assessing potential financial risks and liabilities, primarily related to your auto insurance policy. Most personal auto insurance policies include “permissive use” clauses. Your policy typically provides primary coverage if you grant someone permission to drive your car. This coverage is usually for occasional use; regular use by an unlisted driver may require them to be added to your policy. Confirm your specific policy’s terms regarding permissive use, as some policies may offer limited coverage or require increased deductibles for unlisted drivers.

Should an incident occur, you, as the vehicle owner, would generally be responsible for the insurance deductible before coverage applies. Average auto insurance deductibles can range from a few hundred dollars to $2,500, with $500 being a common amount.

Beyond vehicle damage, you also face potential personal liability if the borrower causes injury or property damage to others. Understanding your policy’s liability limits is important. Ensure the borrower holds a valid driver’s license, as lending to an unlicensed driver could lead to your insurance denying coverage.

Determining a Fair Daily Rate

After calculating your direct expenses and considering potential risks, determine a fair daily or per-use rate. Begin by summing the estimated daily or per-mile costs for fuel, maintenance, and depreciation. For instance, if you estimate a combined operational cost of $0.70 per mile and the borrower plans to drive 50 miles, that’s $35 in direct expenses.

Add a small premium to account for the risk and inconvenience associated with lending your personal vehicle. Research local peer-to-peer car-sharing services or traditional rental car rates for similar vehicle types. These comparisons can help establish a competitive price point.

The final rate can also be influenced by the relationship with the borrower, the duration of the loan, and any special circumstances. For example, a longer borrowing period might warrant a slightly reduced daily rate compared to a one-day loan. The convenience you provide by offering a personal vehicle, often available on short notice, also holds value.

Establishing Clear Terms

Beyond the monetary charge, a clear agreement detailing the terms of the car loan is important. Specify the agreed-upon payment method and schedule, such as payment in advance or upon return of the vehicle. Define the fuel policy, clarifying whether the car should be returned with a full tank or if fuel costs are integrated into the daily rate.

Establish any mileage limits, outlining potential additional charges for exceeding these limits. Clearly state who is authorized to drive the vehicle. Detail expectations for the car’s return, including its cleanliness, overall condition, and the precise time and location for drop-off.

Provide the borrower with instructions on what to do in case of an emergency, breakdown, or accident, including your contact information and basic insurance details. A written agreement, even a simple one, can serve as a valuable reference for both parties.