Test Drive Agreement: Guide for Buyers/Sellers

The National Automobile Dealers Association (NADA) advocates for standardized practices within vehicle transactions; their guidelines often emphasize the importance of a legally sound test drive agreement. Such an agreement represents a contract where the prospective buyer obtains temporary possession of a vehicle from the seller, typically a dealership or private owner, for evaluation purposes. The core function of a test drive agreement is to mitigate risks and clearly define liabilities during this evaluation period, protecting both parties from potential damages or legal disputes arising from the operation of the vehicle on public roads.

Understanding the Test Drive Agreement: A Comprehensive Guide

A test drive agreement is a crucial document for both buyers and sellers involved in the sale of a vehicle. It acts as a shield, outlining the responsibilities and liabilities of each party during the test drive period. A well-structured agreement minimizes the risk of misunderstandings, disputes, and potential legal complications. Here’s a breakdown of the key sections and elements that should be included in a comprehensive test drive agreement.

1. Identification of Parties

This section is the foundation of the entire agreement. Clearly identify all parties involved:

• Seller (or Vehicle Owner): Full legal name, address, and contact information. If the seller is a dealership, include the dealership’s name, address, and contact person.
• Prospective Buyer (or Driver): Full legal name, address, driver’s license number, and contact information. Verify the validity of their driver’s license before proceeding.

2. Vehicle Information

Provide a detailed description of the vehicle being test driven. This section should be meticulous and leave no room for ambiguity.

• Year, Make, and Model: Clearly state the vehicle’s year, make, and model.
• Vehicle Identification Number (VIN): This unique identifier is crucial for accurate vehicle identification.
• Odometer Reading: Note the exact odometer reading at the start of the test drive. This helps track mileage and identify any discrepancies.
• Existing Condition: Briefly describe the existing condition of the vehicle, noting any visible scratches, dents, or other pre-existing damage. Consider taking photos or video evidence for record-keeping.

3. Purpose of Test Drive

Clearly articulate the purpose of the test drive within the agreement.

• Evaluation: State that the purpose of the test drive is for the prospective buyer to evaluate the vehicle’s performance and suitability for purchase.
• Prohibited Activities: Explicitly prohibit activities such as off-road driving, racing, or using the vehicle for commercial purposes.

4. Duration and Route

Specify the time frame and allowable areas for the test drive.

• Start and End Time: Clearly define the start and end time of the test drive.
• Geographic Limitations: If there are restrictions on where the vehicle can be driven (e.g., specific roads or neighborhoods), clearly outline these limitations.
• Mileage Limit: Consider setting a mileage limit to prevent excessive use of the vehicle during the test drive.

5. Insurance Coverage

This section is of paramount importance, addressing liability in case of an accident.

• Seller’s Insurance: State whether the vehicle is covered by the seller’s insurance policy during the test drive. If so, specify the details of the policy, including the insurance company and policy number.
• Buyer’s Insurance: Clarify whether the buyer’s insurance policy will provide coverage during the test drive. It is highly recommended that the buyer provides proof of insurance.
• Liability: Clearly state who is responsible for damages or injuries resulting from an accident during the test drive, taking into account relevant state laws regarding negligence and liability.

Here’s an example of how insurance coverage could be presented in a table:

Aspect	Seller’s Insurance	Buyer’s Insurance
Coverage	Yes / No	Yes / No
Policy Number	[Policy Number]	[Policy Number]
Insurance Company	[Company Name]	[Company Name]

6. Damage and Liability

This section outlines the responsibilities for damage or loss incurred during the test drive.

• Responsibility for Damage: Clearly state who is responsible for paying for damages to the vehicle that occur during the test drive. It is common for the buyer to be responsible if the damage is caused by their negligence.
• Responsibility for Tickets and Violations: The agreement should state who is responsible for any traffic tickets, parking violations, or other fines incurred during the test drive. Typically, the driver is responsible.

7. Indemnification

This clause protects the seller from liability arising from the buyer’s actions.

• Hold Harmless Agreement: The agreement should include a clause stating that the buyer agrees to indemnify and hold the seller harmless from any claims, losses, or expenses arising from the buyer’s use of the vehicle during the test drive.

8. Return of Vehicle

Clearly outline the expectations for returning the vehicle.

• Time and Location: Specify the agreed-upon time and location for the return of the vehicle.
• Condition of Vehicle: State that the vehicle should be returned in the same condition as it was at the start of the test drive, with reasonable wear and tear excepted.

9. Agreement to Purchase (Optional)

This section is optional and should only be included if the parties have already agreed on the terms of the sale.

• Purchase Price: State the agreed-upon purchase price of the vehicle.
• Payment Terms: Outline the payment terms, including the method of payment and the due date.
• Closing Date: Specify the date on which the sale will be finalized.

10. Governing Law

This section specifies which state’s laws will govern the agreement.

• Jurisdiction: State the specific state whose laws will be used to interpret and enforce the agreement.

11. Signatures

The agreement must be signed by both the seller and the prospective buyer.

• Date: Include the date on which the agreement is signed.
• Printed Name: Include the printed name of each party next to their signature.

So, whether you’re itching to get behind the wheel or handing over the keys for a test run, a solid test drive agreement really is your best friend. It’s a simple way to protect everyone involved and make sure that exciting pre-sale spin stays smooth and stress-free. Happy driving!