Who Keeps the Car After Separation in Ontario?

A car is often one of the first things couples argue about at separation. One of you may drive it to work, the other may need it for the children, and there may still be a loan or lease payment due every month. A vehicle is hard to share, so usually one person keeps it.

The law looks at more than who uses the car. It asks who owns it, what it is worth, and what is still owed on it. This article explains how those pieces fit together so you can have a more practical conversation about the car.

Start with who owns the car

Ownership disputes between spouses are generally treated the way they would be between unmarried people, with one important exception: property held as joint tenants, and money on deposit in both names, is presumed to be intended as joint ownership. This matters for a car that is titled in one name or in both.

In practice, look at the ownership registration, the bill of sale, and who paid for the vehicle. A car in one name is a good starting point, but it does not settle everything. For married spouses, the car usually still counts when property is divided, whoever's name is on it.

How a car counts for married spouses

When married spouses separate, the spouse whose net family property is lower is entitled to one-half of the difference between the two net family properties. This is called the equalization payment. Net family property is the value of all property a spouse owns on the valuation date, other than excluded property, less debts and liabilities, and less the net value of property owned on the date of marriage. The valuation date is generally the date you separate with no reasonable prospect of getting back together.

So the car is not split by cutting it in half. Its value on the valuation date goes into the owner's column, and the amount still owed on it comes off. A car worth more than the loan adds to that spouse's net family property. A car worth less than the loan can reduce it, because debts such as car loans are subtracted.

A car you owned before the marriage is not treated as brand new property. Property owned on the date of marriage is generally deducted in the calculation. Whoever claims a deduction or an exclusion has to prove it, so keep records.

Financed, leased or paid off: what changes

The main difference is how much of the car's value is really yours. The table below shows the general approach for a married couple. Your lender or leasing company has its own contract with you, so the details depend on the documents.

Who keeps the car and who is responsible to the lender are two separate questions. If one of you keeps a financed car, the lender may still hold both names on the loan until it is refinanced or paid out. Ask the lender what it needs, and make sure any agreement says who pays and by when.

If you were never married

The equalization rules apply to spouses who are married to each other. Unmarried partners are not spouses for this purpose. Common-law couples are not legally required to split property acquired while living together, and they may choose a cohabitation agreement or separation agreement instead.

For an unmarried couple, the title to the car, who paid for it, and any agreement between you carry more weight. Other legal claims may be possible depending on the facts, and a lawyer can tell you whether they apply to you.

Settling it by agreement, or going to court

Most couples settle the car as part of a larger deal. Marriage contracts, cohabitation agreements and separation agreements can deal with property division, and both partners must sign in front of a witness who also signs. You do not need a lawyer to make a separation agreement, but legal advice before signing is recommended. Each person should understand the terms, give complete and honest financial information and not be under pressure.

If you cannot agree, the Superior Court of Justice has jurisdiction over divorce and family property, and the Ontario Court of Justice cannot decide property division. Timing matters too. An equalization application must be brought by the earliest of two years after a divorce, six years after separation, or six months after the first spouse's death.

• A common trade is that one spouse keeps the car and the value is credited in the property calculation.
• Another is that the person keeping the car takes over the loan or lease and gets it refinanced or transferred.
• Another is that the car is sold and the net proceeds are shared as agreed.

What to do next

• Write down the separation date, since this is when the car is valued.
• Get a realistic market value for the car on or near that date.
• Collect the loan or lease statement showing the balance and monthly payment.
• Gather the registration, insurance and any proof of gifts or pre-marriage ownership.
• Agree in writing, if you can, who keeps the car, who pays the loan or lease, and who handles insurance.
• Speak with a lawyer before signing anything if the car, loan or lease is tied to a larger property settlement.

Before you sell the car or take on new debt against it, it is worth confirming with a lawyer how that could affect your situation. If the car is needed for work or children, say so openly so it can be part of the discussion.

Frequently asked questions