Dear Liz: A friend of ours had a huge problem with car repairs last year. This friend got ripped off by a mechanic who took money for the work to repair his car and never repaired it. So my husband and I were kind enough to loan him our van for what we thought would be a short time. The loan has now lasted a year. He put a lot of repair work into it, but we need to ask for the vehicle back. It is not titled to him. I feel bad that he has spent money working on the van. Should we offer him any money or reimburse him for the work? I have a feeling it’s not going to go over very well. Any thoughts or advice on how to handle this would be appreciated.
Answer: As you probably know, the pandemic and a lingering microchip shortage have upended the car market, dramatically raising prices for both new and used cars. Interest rates have gone up as well, making car loans a lot more expensive. Your friend may well have made the calculation that repairing a borrowed vehicle made a lot more economic sense than trying to buy a replacement. He avoided lease or loan payments, plus he may have benefited from free insurance coverage if you continued to pay those premiums.
One approach would be to put a rough dollar value on those savings compared with what he spent on repairs and offer to reimburse him for the difference.
Should you ever again want to loan a potentially valuable asset to a friend, consider discussing in advance who will be responsible for maintenance and repairs as well as how long the loan is expected to last. Putting the details in writing could help both parties avoid awkward misunderstandings.