Co-Owning a Car

Here are different ways you can co-own and use a shared car.

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Who actually owns the car is a key issue when you’re sharing a car. This may affect insurance rates, how you split costs, and who is ultimately responsible for the vehicle when issues come up, such as an accident or impoundment. If you share your car with your neighbor, your options are simple: Either one or both of you can own the car.

One Owner of the Shared Car

Keeping the car in one owner's name is a simple approach, leaving no question about who will get the car if you ever end the arrangement. You also won't have to deal with transferring partial title, paying transfer taxes, and so on. The downside is that some insurance companies will not add a second driver who is not an owner or a family member of the owner.

Two or More Owners of the Shared Car

Another option is for both you and your friend or neighbor to own the car. You could buy a car together with your neighbor or, if you already own a car, you can sell a share to your neighbor. You'll have to come up with an appropriate price and keep a written record of your transaction, and your neighbor may have to pay a sales or use tax to buy half of the car. In some states, transferring partial title may trigger other requirements, such as a smog check or transfer fee.

If you are buying a share of someone else's car, find out whether there are any liens on the car. Usually, the loan company that financed the car has a lien on the car until the loan is paid off. This isn't necessarily a bad thing; most cars are financed this way. But make sure the owner is current on the car payments and plans to keep it that way when you become a partial owner—otherwise, the car could be repossessed. Also, watch out for liens placed on a car when an owner takes out a loan and uses the car as collateral. Be wary of sharing a car with this type of lien, often called a "car title loan." These loans are often predatory and difficult to pay off, and may indicate that the car owner is in a tough financial situation.

To get both of your names on the title, also known as the "pink slip," you will need to follow the procedures required by your state's motor vehicle department. These requirements are often spelled out on the department's website.

You should specify on the title whether you are holding the car in joint tenancy, tenancy in common, or some other form. Joint tenancy means your half of the car automatically goes to the other owner if you die. Tenancy in common means you can leave your half to whomever you'd like, as part of your estate. If you want to leave your share of the car to your co-owner, it makes sense to own the car in joint tenancy.

Rules for Using a Co-Owned Car

It's important to work out the details of your car sharing arrangement ahead of time, to make sure sharing will meet everyone's needs and to help prevent confusion or conflicts. Here are some of the questions you may need to cover in a carsharing agreement:

  • What's our schedule for using the car? Will we use it equally or will one of us use it more often than the other?
  • Will we have any rules for longer trips? For example, will we have to get permission from the other to take the car out of town, or will there be an annual mileage limit on our car use?
  • Who may ride in the car and who may drive it?
  • Who owns certain accessories inside of the car?
  • Are there any rules about pets or smoking in the car?
  • Are there any rules about fueling, such as requiring sharers to refill the gas tank or to leave at least a quarter of a tank at all times?

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