A friend asked to borrow my car, and I'm wondering about the implications of lending out my vehicle. Is this a bad idea? – Geeta in Brampton, Ont.
It was Polonius (with a little help from Shakespeare) who said "neither a borrower nor a lender be," but at some point we've all done one, the other or both. Whether someone asks to use your vehicle for a camping trip or a quick jaunt to the grocery store, it can be tough to say no – but there are a few things to consider before saying yes.
"When you lend your car or truck to another driver, you're also lending them the insurance that goes with it, and the good driving record you've established with that car. Because of that, it's well worth taking time to understand and ask some questions before lending out your vehicle," says Natalie Dupuis, senior product manager, auto, at RBC Insurance.
Make sure you know what kind of driver they are, how long it's been since they've driven, and whether anyone else will be using the car. In addition, you want to ensure that anyone operating your vehicle is legally allowed to drive.
If not, what's the worse that could happen?
"Let's say they're not licensed to drive, then there's a possibility that the insurance policy attached to the car won't respond to a claim, and that means the owner of the vehicle may be responsible for damages and injuries sustained in that accident," says Dupuis.
"The financial risk can be fairly serious. That's the extreme side of it; the other part is if they have an accident it will likely affect your own insurance premium. So if you've kept a good record and kept your premiums down, suddenly someone else's accident is driving up your premiums."
If an individual is driving your car on a somewhat regular basis, and especially if they live in the same household, your insurance company should be made aware so they can decide if an additional premium applies. Withholding this information could invalidate your coverage.
For the individual borrowing a vehicle, there's more to think about than obtaining the keys and filling the tank.
Check to make sure that the vehicle registration is valid, and the insurance attached to it is valid and sufficient. "You should get the liability slip from the owner, and the dates on it should coincide with the time that you're borrowing it. And ask the question: is this policy active and in good standing?" says Dupuis.
"We've been discussing what are considered personal passenger vehicles, defined in Canada as a vehicle with a Gross Vehicle Weight of no more than 4,500 kilograms, including the weight of whatever you're carrying. A light pickup truck is fine, but if you're getting into something larger – say your neighbour has a small cube van which is now a commercial vehicle, their insurance agreement may stipulate conditions that are very different than a private passenger policy," says Dupuis.
You'll be on the hook for any unpaid parking tickets incurred while your vehicle was on loan; however, traffic offences such as speeding go against the actual driver's record. If – and again, this is an extreme example – a vehicle is impounded under Ontario's speeding laws with regard to street racing, the registered owner would be out-of-pocket the money (not to mention the time) to recover the vehicle.
When lending out a vehicle, your insurance and good driving record are also on loan. You're essentially taking responsibility for whatever happens. Ask questions, and make sure you agree on how, when and by whom it's going to be used in order to make an informed decision.