Who Pays if I Damage the Dealer's Loaner?

Start with the agreement on the counter

The dealer will ask you to sign a loaner or courtesy-car agreement, and that document decides more than people expect. Many make the borrower responsible for any damage to the car and ask for proof of your insurance. Some dealers include or sell their own damage protection for loaners. You can't know which you have until you read it.

Look for five things: who is responsible for damage, whose insurance is primary, who else may drive, any mileage or distance limit, and who pays tolls and tickets.

How your own policy usually fits

A personal auto policy commonly extends to a car you don't own but are using for a short time, which is exactly what a loaner is. Your liability limits travel with you, so if you injure someone or damage their property while driving the loaner, your policy is where that claim normally lands. That isn't only policy wording: Insurance Code 11580.9 says that when a car insured by a business that sells, repairs, services or stores vehicles is driven by someone other than the business or its staff, the business's insurance is excess over other insurance available to the driver.

Damage to the loaner itself is a separate question. If you carry collision and comprehensive on your own car, that coverage often extends to the loaner, subject to your deductible. If you carry liability only, damage to the loaner is commonly yours to pay. Charges for the days the dealer can't use the car, and for any drop in its resale value, may sit outside your policy altogether. All of this varies by insurance company, so check your declarations page and your policy's definition of a non-owned car.

The gaps worth checking

• Long repairs. A loaner kept for weeks can start to look like a car furnished for your regular use, which some policies exclude.
• Other drivers. Your spouse or teenager may be covered under your policy and still be barred by the dealer's agreement.
• Work use. Using the loaner for deliveries or rideshare changes the answer, just as it would in your own car.
• Mexico. Your California policy generally won't respond there, and the agreement probably forbids it anyway.

Before you drive off

1. Walk around the car and photograph every panel, the wheels and the windshield.
2. Photograph the odometer and the fuel gauge.
3. Keep a copy of the signed agreement with your own policy papers.
4. If anything happens, tell the dealer and your insurer the same day, and exchange information with any other driver as the law requires.

Not sure whether your policy extends to a borrowed car at all? Send us your declarations page and we'll tell you what it does.