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If you're looking to rent out cars to earn money, it's important to have a legally-sound agreement in place first. Read on to find out what to include in your car rental agreement, so that you have peace of mind your company will be protected if anything goes wrong.
What's in this guide?
- What is a car rental agreement?
- When should I use a car rental agreement?
- Access customisable legal templates online
- Car rental agreement vs Car loan agreement
- What does a car rental agreement include?
- How effective is a car rental agreement?
- Do I need to engage a lawyer?
- How do I write a car rental agreement?
- Where to get free legal documents and templates like a Car Rental Agreement
What is a car rental agreement?
A car rental agreement is basically a contract between the owner of a car and a person who hires the vehicle, who is usually the driver. This type of agreement will typically provide a clear description of the vehicle, duration of the hire, the payment terms and what happens if someone damages or misuses the vehicle.
When should I use a car rental agreement?
Generally, if you rent out a fleet of cars – either via a dealership or a car-sharing app – you'll want to have a standard agreement in place. In addition to cars, you can also use this type of rental agreement to rent out other types of vehicles that have a vehicle identification number, such as delivery scooters and motorcycles. Just make sure the agreement is customised to reflect the type of vehicle you are renting out.
If you want to rent out a car using a more informal arrangement, for example to a friend or a family member, you may still want to consider using an agreement. That way, if anything goes wrong both the owner and the driver will be protected.
Access customisable legal templates online
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Car rental agreement vs Car loan agreement
A car rental agreement is a contract between a car owner and an individual who hires the car for a set amount of time. This means at the end of the lease, the driver must return the car to the owner, unless the agreement allows the driver to buy the car at the end of the lease.
A car loan agreement is used when you purchase a car and need to borrow money in order to fund the purchase. It is used to formalise a personal loan for a new or used car. Under this type of agreement, the borrower has to repay the loan and interest over a fixed period of time.
What does a car rental agreement include?
A car rental agreement will typically be amended to suit your specific circumstances. It can also include optional terms in case the driver wants to buy the car or extend the rental period.
- Car details. The document may specify if the vehicle is new or used, the purpose of the vehicle and other details about the vehicle
- Payment. It might state the weekly, monthly or annual payment for renting out the car.
- Maintenance. The agreement may state who has the responsibilities for maintenance and repair of the car.
- Insurance. The agreement might mention the minimum insurance the driver must get in order to get behind the wheel.
- Option to extend the lease term. This clause gives the driver an option to hire the car for a longer period.
- Prohibition on selling and sub-renting. As a car owner, you may wish to expressly ban the driver from selling or sub-renting the car to another person.
How effective is a car rental agreement?
A car rental agreement is a binding legal contract. This means if the car owner fails to meet the requirements of the agreement – for example, by renting out a car that is not roadworthy or by damaging the car – the other party can take action through the court system. As well as protecting or eliminating your own liability, you'll be potentially able to make legal claims if an agreement is broken by the driver.
Do I need to engage a lawyer?
That's your call to make. Many legal services provide a template that you can customise to suit your particular situation. You may choose to use a car rental agreement template, make any necessary edits and then have it reviewed by a lawyer to make sure it's legally sound. This can help to make sure the agreement does not impose any incorrect or unfair terms and that it's otherwise legally compliant.
Some car rental agreements are also subject to the National Consumer Credit Protection Act. This means the agreement needs to be carefully reviewed by a lawyer to make sure it meets the required legal standards.
How do I write a car rental agreement?
You can prepare a car rental agreement by including the key information about the car(s). This usually includes:
- Sections for the names and addresses of the driver and the owner
- The make, model, year, colour of the car
- Vehicle identification number (VIN) of the car.
You will also need to include the details of the person who is hiring the vehicle, who is usually the driver. If more than one person want to hire the car together, you can include multiple parties.
Where to get free legal documents and templates like a Car Rental Agreement
Here's some more information on the options you have when drafting a car rental agreement:
- LawDepot. LawDepot provides a free template so you can customise the agreement by answering a few simple questions.
- Sprintlaw. Sprintlaw can provide a fixed fee package that includes a car rental agreement customised to your business' requirements, phone consultations with a lawyer and any changes to the final draft.
- Net Lawman. Net Lawman offers a template for leasing any vehicle. You can purchase a template only or a template and review service for a fixed price.
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