It was 2008 when three students -- or maybe four -- walked onto the lot at GRT Motors, a used-car dealership in the Atlanta area. Steve Lang, the owner, was there to greet them.
The kids liked a 1992 Mazda Protégé and wanted to take it for a spin. As he usually does, Lang copied their driver's license information before handing them the keys so they could take it for a test drive. He didn't ask for proof of their car insurance.
Not every dealer will let you take a test drive without accompanying you in the vehicle. But Lang does. "People can always take a vehicle nearby for an inspection if they wish. That's how it works," he says.
The kids drove it for nearly an hour -- into the next county, says Lang. They liked the Protégé. They phoned from the road to say they wanted to buy it. But it turned out they'd been driving with the emergency brake engaged all that time.
When they returned to Lang's lot, the brakes were gone. Right in front of his eyes, "they took a corner and they literally slid across the street into a bush."
He pulled the car out of the weeds and got it back to the lot. Two of the quarter panels were scratched. The kids, undaunted, wanted to haggle over the price of the car. Since it was damaged, they reasoned, he should bring the price down some. Lang chased them away and chalked it up to the life of a car dealer.
He paid $150 to fix the scratches and replace the brake line, fluid and a caliper rather thansee his car insurance rates go up for filing an insurance claim.
Not every test-drive misadventure ends so well. But here's the question: If Lang had made the claim, would his insurance have paid? If you're out on a dealer test drive and you wreck the car -- or even total it -- who pays for the damage?
It sounds like a complicated problem, but it's not. Here's a rule of thumb on car insurance: The coverage usually goes with the vehicle.
Generally, the liability insurance belonging to the auto's owner -- car dealers keep what’s known as a “garage policy” -- is ultimately responsible for the claim, says Bob Passmore, spokesman for the Property Casualty Insurers Association of America.
That doesn't mean you or your insurer won't get stuck with the cost. It's not unusual for a dealer to require you to sign a waiver before letting you drive one of his or her cars.
That’s because, while it’s not exactly common for someone to wreck a vehicle on a test drive, it’s hardly unheard of. An unfamiliar car, an implicit mission to test its limits: What could go wrong?
Waivers for test-drivers
Laws differ from state to state. In the states that allow it, the waiver asks you to agree that your insurance will be "primary." If an accident happens, your insurance pays first.
Fred Buchi, a sales associate at Liberty Bay Auto, a used-car dealership in Poulsbo, Wash., says his company asks every customer to sign a waiver before test-driving a vehicle. "They sign a document showing that they have car insurance and that it would cover them on the test drive. If we didn't do that, our insurance would be so expensive," Buchi says.
Should you sign a waiver and wreck a test-driven car, “your liability coverage would pay for whatever you ran into with the dealer’s car,” up to your coverage limits, says CarInsurance.com consumer analyst Penny Gusner.
Suppose you have an old car and, in your quest for the cheapest car insurance, have just $10,000 of liability insurance and you crash into a Jaguar and total it, says Passmore. Your insurance would pay for the first $10,000 in repairs (or replacement cost.) After that, the dealer's insurance pays.
Damage to the shiny car you wrecked would be covered by your insurer only if you carry collision coverage, and then probably only up to the actual cash value of the car you have insured, Gusner says. If you have a Civic and are test-driving a Lamborghini, you might have a problem.
The Craigslist scenario
What if the car you're driving belongs to a private party -- say, someone who advertised a car for sale on Craigslist? Suppose you're out for a test drive and run the car into a tree. Now what?
Generally, the seller's insurance is responsible if that happens, says Passmore.
That's why, when you sell a car, you'd be smart to keep it insured. It's tempting, if you're not driving it, to let the coverage lapse and save money. But not only could someone hit it while it's parked on the street, you also might need that insurance if a potential buyer bangs it up on the test drive.
Also, cautions Passmore, "Don't cancel the liability coverage if you're going to be operating it at all or letting someone test-drive it."
That's because, basically, "when you give somebody your keys, you give them your insurance," Passmore says.