Car Rental Agreement Between Friends Template for England and Wales

When lending your car to a friend or borrowing a vehicle from someone you know personally, a car hire contract (also called a car rental agreement) provides written protection for both parties. This document formalises what might otherwise be a casual arrangement, ensuring compliance with England and Wales regulations while keeping the friendly nature of your relationship intact. The agreement defines responsibilities, insurance requirements and liability, so both sides can review and sign it before the keys change hands.

What is a car hire contract template?

A car hire contract template is a ready-made rental agreement you fill in with the details of a specific hire: who owns the vehicle, who is hiring it, the hire term, permitted use and what happens if something goes wrong. Because it is a template, you keep the same core terms and conditions and adjust the specifics for each arrangement, rather than drafting from scratch every time. You can start from this free sample, customise it to your situation, then read it through and sign to make the arrangement binding.

Car hire versus contract hire

These two arrangements sound alike but work differently, so it helps to keep them apart before you draft.

This template covers the first column. If you are entering a leasing arrangement instead, the terms, insurance policy and return conditions will be set by the finance provider.

When do you need this document?

You need this agreement whenever a friend wants to borrow your vehicle for more than a brief errand. Common scenarios include weekend trips, holiday use while you are away, temporary transport during repairs, or extended borrowing periods. The document becomes particularly important when the hire involves overnight use, travel outside your local area, or continental travel abroad, where insurers often need advance notice and additional cover. Even between close friends, written terms prevent misunderstandings about fuel costs, damage responsibility and return conditions.

What should a car hire contract include?

The strongest agreements follow a clear checklist so nothing is left to memory:

• Parties and vehicle details: names, addresses, registration plate and mileage at handover.
• Hire term: exact start and end dates and times, and any rules on extending the booking.
• Permitted use: geographical limits (including any continental or overseas travel), prohibited activities such as commercial use, and whether an additional driver is allowed.
• Fuel arrangement: whether the vehicle is returned full, and how fuel is paid for or reimbursed.
• Insurance and excess: who is covered under the insurance policy, who pays any excess, and how claims are handled.
• Condition and return: photographs, cleaning requirements and any charges for damage beyond fair use when the hirer returns the vehicle.
• Payment terms: hire fee, deposit and any extra charges for late return or damage.
• Safety and contact: a mobile number for both parties and clear steps to follow after a breakdown or accident.

Setting these out in writing means both people can read the same terms and sign with confidence.

A short worked example

Say Priya lends her Ford Focus to her friend Tom for a five-day trip. The agreement records the registration and 42,310 miles at handover, sets the hire term from 09:00 on 3 June to 18:00 on 8 June, names Tom as the only permitted driver, confirms the vehicle is returned with a full tank, and puts a £250 excess on Tom if he causes damage. Both read it and sign. If Tom clips a bollard, there is no argument about who pays the excess or what state the car was in before he took the keys.

How much should you charge a friend to hire your car?

Between friends the hire fee is often nominal or set at zero, with the borrower simply covering fuel and any insurance costs. If you do want a figure, a common approach is to mirror what a low-cost daily rental would cost locally, then reduce it because there is no rental company overhead. Whatever price you agree, record the amount, the deposit and any extra charges in the payment terms so it is written down and cannot be disputed later.

Do you need to notify insurers or the DVLA?

You do not re-register the vehicle or transfer the logbook for a short hire, so the registered keeper stays the same. What matters is insurance. Your standard motor policy may not automatically cover other drivers, so confirm cover or arrange temporary insurance for the hirer and any additional driver before handover. Keep both parties' mobile numbers and licence details available, and note the safety steps to follow if the vehicle is stopped by police or involved in an incident.

Key legal considerations

Insurance cover is the most important part of any car hire arrangement between friends. The agreement should allocate responsibility for excess payments, policy violations and claims handling. Condition documentation through photographs and written descriptions protects both parties from disputes over existing damage versus new incidents when the hirer returns the vehicle. It also helps to set out fuel replacement, cleaning, usage restrictions and the safety procedure to follow after a breakdown.

Legal requirements in England and Wales

Under the Road Traffic Act 1988, any driver must hold a valid licence for the vehicle category and meet minimum insurance requirements. The Motor Vehicles (Third Party Risks) Insurance Act 1969 mandates continuous insurance, so confirm the borrower is properly insured before handover. While informal agreements between friends are not subject to the same formalities as commercial contracts, the fairness principles of the Consumer Rights Act 2015 still apply, and the Unfair Contract Terms Act 1977 prevents unreasonable exclusion clauses. Where you store personal details or share them with an insurer, handle them in line with the Data Protection Act 2018 and any privacy policy you keep.

Related agreements

If your arrangement is more of an ongoing service than a one-off hire, a service agreement may fit better, and for a private vehicle sale rather than a hire an owner finance car sale contract covers the transfer. Browse the full template library to find the closest match.