Car Rental Agreement

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Car Rental Agreement

A Brief Introduction About the Car Rental Agreement

A car rental agreement is necessary for renting a car from a car hire company. When you do not wish to invest in a car due to the hassles and the costs of owning one, then a car rental is a great option. There is a lot of flexibility when it comes to options about the type of car you want to hire and the duration.

The costs to be borne by you as the customer and the car hire company are clearly defined in the car rental agreement.

If you require any clarifications, get them sorted before you fill-up the car rental agreement form.

There is a new concept in car rentals known as person to person car rental. Whether you want to rent out your car or need a car to drive for app-based cabs, you can do all this and more with this concept.

Who Takes the Car Rental Agreement? – People Involved

A car rental agreement is entered into by the car hire company and an individual or company who wishes to avail of this service. The objective of the car hire company is a steady cash flow in terms of rentals, and the customer hiring the car is assured a well-maintained car with a trained driver. Both the parties to the agreement know the costs involved in such agreements and their distribution.

Purpose of the Car Rental Agreement – Why Do You Need It?

A car(vehicle) rental agreement is important to protect the interests of both parties to the agreement. The car hire company has invested in a car to get an expected return from it. They have to take into account the initial costs, depreciation, the recurring costs while calculating the returns. All these costs are factored into the rental charged to customers.

As a customer, you are hiring the car for your convenience. You also need to ensure that the car hire company delivers what has been promised in the agreement, or you will find that you are facing regular problems with the maintenance of the car as well as the driver. This would defeat the purpose of hiring the car.

When you rent a car from a private owner, you need to take extra precautions regarding the title of the car and ensure that the registration papers are in order, and all statutory dues have been paid.

While filling up a car rental application, it is essential to mention the purpose for which the car is being rented and facilities that you expect the car hire company to provide.

If you are interested in hiring a car from Enterprise, then you will have to sign the Enterprise car rental agreement. Enterprise is a reputed car rental company in the US, and they provide car rentals for a wide variety of customers in the US and Canada.

Contents of the Car Rental Agreement – Inclusions

A car rental agreement is an official document which states the relationship between the parties to the agreement, the car hire company, and the customer. The terms and conditions of the agreement must be clearly stated.

A car contract template should include the following:

  • The effective date of the agreement
  • Make and model: The make of the car would be the brand name such as Mercedes, and the model would be perhaps C class. The year of manufacture needs to be mentioned as well as the registration number of the car.
  • Duration of the Agreement: The period for which the agreement is valid, including the start and end dates. Provision for extension of the agreement, if any, should also be mentioned.
  • Limits for mileage: There should be an upper limit mentioned with regard to mileage, either in terms of distance or the fuel consumption in liters.
  • The breakup of rental: The detailed breakup of the rental, including the fees being charged, and other incidental charges, security deposit payable, and terms of payment.
  • Existing damage details: If the car being rented is not new and has a record of accidents, then the details of the damages to the car should be included
  • Insurance protection and waiver of liability: Every car rental agreement comes with insurance protection, which depends on a lot of factors such as the age of the car and condition. The waiver of liability clause ensures that the car hire company is not responsible for any damage or injury to you while using the car
  • Breakdown recovery and emergencies: The agreement should include the contact details of the support staff in case of emergency breakdowns.

How to Draft the Car Rental Agreement?

Points to consider while preparing the agreement

If you are interested in renting a car, you can find a car(vehicle) rental agreement; While drafting a car rental agreement, the following points need to be kept in mind:

  • Relationship between the parties: The names of the parties to the agreement and the relationship between them
  • The effective date of the agreement
  • Governing law: The laws of the state governing the agreement
  • Rental: The details of the rental, including any security deposit. The terms of payment and the frequency are to be included, such as a flat fee, monthly fee, or weekly fee. If it is based on the number of miles, then the rate per mile
  • Rights and obligations: The rights and obligations of both parties to the agreement
  • Term of the agreement: The term for which the agreement will be valid. The place where the vehicle will be collected and returned are to be mentioned
  • Penalty for delayed payment: The due date within which the payment is to be made and the penalty for the same
  • Purpose of rental: The vehicle should be rented for commercial purposes only
  • Warranties and indemnities: The responsibilities of the customer about making timely payment of rentals, use approved drivers and follow any other restrictions mentioned in the agreement

Negotiation Strategy

While entering a car rental agreement, it is important for both the car hire company and the customer to negotiate the rental rates, the terms of payment, payment of costs and insurance, duration of the agreement with provisions for extension and any other clause before signing the agreement so that there are no disputes later on.

Benefits & Drawbacks of the Car Rental Agreement


  • Protection of interest: The interests of both parties are protected under this agreement. The car hire company is assured a steady income flow in terms of car rentals, and the customer can use the car for commercial purposes for the term of the agreement
  • Termination of agreement: Both parties can terminate the agreement after serving 14 days notice
  • Legal recourse: Either party can approach a court of law if any clause in the agreement has been violated
  • Minimization of disputes: There will be lower chances of disputes between the two parties as both have signed the agreement after mutual consent.


  • Loss of use: The owner of the car might require the car before the completion of the agreement, and the car would have to be returned although there was no default on the part of the customer
  • Damage to car and customer: The customer might not be an efficient driver, and this could result in damage to the car. If there is any injury suffered by the customer, then the car hire company would be at risk of facing high-cost litigation. The insurance company may or may not entertain the claim

[Also Read: Car Purchase Agreement]

What Happens in Case of Violation?

A car(vehicle) rental agreement is entered into by a car hire company and an individual or company that does not wish to own a car.

There are several advantages of going for a car rental versus owning a car, such as not having to face the hassles of maintenance and filling up the fuel. You could decide the term for which you would need the car and the model. The car rental agreement ensures that you are provided with a car in reasonably good condition. Where you are using an approved driver, the chances of damage to the car are low.

When you no longer require the car, you merely return the car to the agency, and your responsibility ends after making the terminal payments.

However, in the event, there is a violation of any clause of the agreement starting from the payment of rental to using the car for a purpose other than that stated in the agreement will mean that the party at fault will be severely penalized according to the laws of the state relating to car rentals(1).

If the car hire company conceals facts about the condition of the car, then the customer has the right to take legal action.

When both parties violate the terms and conditions of the agreement, it is considered null and void.

A car rental agreement is extremely important if you want to hire a car. This ensures that you can look at the rates being offered by the car hire company and compare them with the other players in the business. Depending on the reputation of the company and the price, you can select the company you want to agree with.

As a customer, you are relieved of the responsibility of maintaining the car or worrying about transportation in the event of a breakdown. Insurance is taken care of by the contract. All you need to do is pay the rentals as and when they are due.

As a car hire company, a car rental agreement ensures that rentals are received on a regular basis. They need to take care of the maintenance of the car so that the customer has a pleasant experience.

Before agreeing, it is important that both the customer and car hire company read the terms and conditions of the agreement very carefully(2).