LOANER CAR REPAIR

I am concerned mainly about liability. My shop is in NYC aka lawsuit capital of the world.

You should charge yourself with 0% markup on your parts and labor for 2 reasons. 1) You charge yourself so taxes can be applied and paid. You don't want to get audited and the IRS find you buying parts for your cars and not paying taxes on them. Also labor, if your state taxes labor. 2) Your final invoice reflects the true cost to repair the vehicle in parts and labor. This should be filed away like a receipt for any other expense so it shows up on your P&L report.

I pay a little less than $1,000/year per loaner. I've had a customer have an accident in one car and her insurance company did cover the damages (she did not have full coverage).

To shield yourself from liability, yes, you should have them in a separate company, but loaner vs rental is a big deal when talking to insurance companies. Nothing a good agent can't navigate, but be aware that it will affect insurance rates.

In regards to how to pay your employees. I would most certainly pay your techs what they would get paid on a normal job. If you are on flat rate, pay them appropriately. For service advisors it depends on your pay structure. Assuming it is commission based or part commission based you have to be careful. If its slow then you shouldn't have issue not paying them extra since it is not skin off their backs. If it is busy though, they stand to lose money since there are paying jobs waiting for the techs to work on. Paying jobs = money for Service Advisors.

I would file the loaner work however you do to minimize your tax liability however pay your employees fairly. It will benefit you in the long run to take care of your people.

I've been an owner for three years now. It's nice. When I was a full time tech I was happy to get my normal rate for non billable hours. I bill it out at cost to the shop. Keeps track of parts and taxes.

M

I agree with dfrisby. The tech should be paid the same. My question is how much do you pay for insurance on a loaner car? My insurance guy wanted $1,600 per car per year. What if the car comes back with the tail light in the back seat. Does the customer pay for the damage?

My company policy with the loaner cars I have are any expense the customer would have incurred with their car they will incur with my car. So if the tail light gets busted, then they get to pay for it. Now if the tail light was broken when they took it, which it shouldn't have been, then they aren't responsible for the damage that was existing. Likewise, a customer had the loaner and needed to get a jump start because they left the lights on. That was their responsibility.

But if it is a capital repair or maintenance to the loaner car, like oil changes, brakes, exhaust, etc. then that is the responsibility of the ship. Another customer had the loaner and the starter went out. I paid the tow bill back to the shop and the taxi ride home for the customer. I am not certain exactly what portion of my insurance is the loaner car but my garage keepers ($million plus liability, quarter million contents (cars, tools, cash, etc.) plus two commercial vehicles is under $4000 a year and just went down again this year to just over $3000.

Loaner cars are great. Yeah, there's a headache and an expense but it has closed some jobs and brought in other jobs that I would not have gotten otherwise. It can be the difference on a slow day between getting the job and having them "I can't be without my car, I need it. I'll have to reschedule for another day." and then not come back. You remove one more objection from the equation. I was the first in my area to have loaner cars and it's great to have them.

Agreed. I disagree with the the charging for gas, however. I have 3 loaners. I tell customers we operate on the honor system for gas. I fill up the cars every weekend if I have them and chalk it up as operating expenses.

Why shouldn't the customer have to pay for the gasoline they used? If they were driving their own car they would have to pay for the gasoline anyway. Their car, my car, the expense to them is the same. Do you pay for their parking tickets and bridge tolls too? If your customer is so petty that they complain about or refuse to replace the gasoline they used, then perhaps you don't need that customer. They aren't a customer, they are a consumer, they consume all you have to offer and appreciate none of it.

The loaner car that you have for their convenience is at great expense to you. Why can't you charge them for the expense you incurred specifically, exclusively, directly and solely as a result of their use of your loaner car? Depreciation, insurance, maintenance and capital repairs are a cost of ownership whether the car sits in the lot for a month or doesn't see your property for more than 10 minutes between customers. Gasoline, parking tickets, bridge tolls, parking lot fees, etc. are all expenses the customer would have incurred with their own car, so why shouldn't they pay those? It seems only reasonable.

Why shouldn't the customer have to pay for the gasoline they used? If they were driving their own car they would have to pay for the gasoline anyway. Their car, my car, the expense to them is the same. Do you pay for their parking tickets and bridge tolls too? If your customer is so petty that they complain about or refuse to replace the gasoline they used, then perhaps you don't need that customer. They aren't a customer, they are a consumer, they consume all you have to offer and appreciate none of it.

 

The loaner car that you have for their convenience is at great expense to you. Why can't you charge them for the expense you incurred specifically, exclusively, directly and solely as a result of their use of your loaner car? Depreciation, insurance, maintenance and capital repairs are a cost of ownership whether the car sits in the lot for a month or doesn't see your property for more than 10 minutes between customers. Gasoline, parking tickets, bridge tolls, parking lot fees, etc. are all expenses the customer would have incurred with their own car, so why shouldn't they pay those? It seems only reasonable.

Maybe I should have been more specific. We have them sign an agreement form that states they are responsible for gas, along with a whole bunch of other legal 'mumbo jumbo' "no smoking, insurance, liability, etc"... That being said, 90% of my customers bring back the cars with just as much gas or more than when they got the vehicle. The 10% who don't put gas back in the cars, it's usually only a couple of bucks. Gas is ~$2/gallon, I can swing a few gallons a week.

To relate this to something else, credit card processing fees. I don't charge an extra 3% when a customer swipes their card, and I don't offer a discount for cash. I chalk up CC processing fees as an expense and make it fit my budget.

I am currently in the process of setting up some loaner vehicles. I have resisted it for a long time because of the cost and liability, but I now believe it is something we almost need to do. I thought I would share some of what I have learned / experienced so far. To clarify, our cars are not yet on the road. I think the first thing we all worry about is the liability. What if someone gets into an accident and you get sued. For starters, all of us in this business run the risk of being sued everyday. If something goes wrong after we repair a customers car, we can be sued. We all manage that risk with procedures and insurance. If you have loaner cars for your customers, they can essentially be owned 2 ways. By your company, or you can set up another company.

I have chosen to register and insure them as part of my company for several reasons. First, I don't believe that setting up a separate company will provide you with much protection. Legally a company must be created to for profit, not as a means to protect assets. I believe any good lawyer would successfully argue that the purpose of your "loaner car company is to protect your business, not to generate profits. If they are not successful with that argument, they will still say you are responsible because you provided the car. Then there is the cost of insurance as well as the setup and maintenance costs of the "loaner car company". The quotes I have gotten for insurance on loaner cars is $1000 when they are added onto my company policy and $3000 when set up as a rental car for $2,000,000 worth of liability.

So here is the way I see it. If something happens, the customer and their insurance will be first. Then the 2M liability policy on the car, then the 1M shop liability coverage, and I am looking at adding a 1M umbrella policy for a few hundred dollars more a year. I don't see many people winning all that, and then still coming after the assets of my company.

Scott

I am currently in the process of setting up some loaner vehicles. I have resisted it for a long time because of the cost and liability, but I now believe it is something we almost need to do. I thought I would share some of what I have learned / experienced so far. To clarify, our cars are not yet on the road. I think the first thing we all worry about is the liability. What if someone gets into an accident and you get sued. For starters, all of us in this business run the risk of being sued everyday. If something goes wrong after we repair a customers car, we can be sued. We all manage that risk with procedures and insurance. If you have loaner cars for your customers, they can essentially be owned 2 ways. By your company, or you can set up another company.

 

I have chosen to register and insure them as part of my company for several reasons. First, I don't believe that setting up a separate company will provide you with much protection. Legally a company must be created to for profit, not as a means to protect assets. I believe any good lawyer would successfully argue that the purpose of your "loaner car company is to protect your business, not to generate profits. If they are not successful with that argument, they will still say you are responsible because you provided the car. Then there is the cost of insurance as well as the setup and maintenance costs of the "loaner car company". The quotes I have gotten for insurance on loaner cars is $1000 when they are added onto my company policy and $3000 when set up as a rental car for $2,000,000 worth of liability.

 

So here is the way I see it. If something happens, the customer and their insurance will be first. Then the 2M liability policy on the car, then the 1M shop liability coverage, and I am looking at adding a 1M umbrella policy for a few hundred dollars more a year. I don't see many people winning all that, and then still coming after the assets of my company.

 

Scott

All good info and sounds right on track with what I have been told. I've looked at setting up a separate company too, but I haven't pulled the trigger on it yet. $1000 per car with 2M worth of liability is a steal!!! I need to speak with your agent!

We've had to switch insurance companies this month and it has been nothing but a huge headache. Part of me wants to say 'screw it', sell the loaner cars, and just start going with enterprise. However, I cannot express how convenient it is to have a loaner car here for the customer who rolls in on Friday at five with a leaking water pump and is on his way to Houston (3 hour trip).

The difference in insurance is minimal here in Mi. I have been loaning out my personal vehicles for years. The customers wash them, put fuel in them, and some even wax them for me. I have a beat up rusty old pickup for the guys that have rusty beat up pickups or that need a ladder rack. I have a newer suburban for the soccer moms and a volvo wagon for the people who must recycle all the time. What you want to add is a dealers blanket policy. That will protect your assets. Make sure to get a copy of the drivers license before letting them take it. The shop owns all of my personal vehicles. There is a coverage limit that I watch out for, but any and all are covered. Even if I just bought one that no one knows about. There is just a slip you put inside the vehicle to prove it's insured. Thinking about getting a few CRV's. The mailmen here abuse them like no else can. Super durable. If you tell them its a loaner some people will trash them. If you tell them you can let them take your vehicle they are super happy and treat it like your own. It's spelled the same but sounds different. Like potato and potato. Hahaha.

I sent my loaner to the auction. I go back and forth between having clean and maintained free loaners for my customers and getting infuriated when they come back trashed and drained of gas over and over again. I'm in a no loaner period now.