What happens if I let my friend borrow the car and he broke it?

You have the right to seek compensation for all damages that are caused by the driver's actions or failure to act properly. If your claim is valued at $7,500 or less, you can file the case in small claims court. However, your idea to demand the driver pay you for the damage is a good one and the court may ask whether or not you have tried to informally resolve this dispute by asking for payment. Don't wait too long for your friend to respond as there are certain deadlines for you to file a case in small claims court. In California, there is a three year deadline from the date of the damage to the property to file a lawsuit in court or your right to do so is barred. You will have to prove your case in court and that will require witnesses to testify for your case or to provide sworn statements to the court.

You would have to prove that the driver did something negligent to cause the problem. Just the fact that it happened would not be enough. Unless the car was brand new it would be difficult that he did something negligent if there are no witnesses. I'm sure he will say that he was shifting and it just happened. You are going to have to have some direct proof that he did something wrong.

Yes, you can sue in small claims court to recover for damages incurred in any "borrowing" circumstance such as this one. Even though this is a gratuitous bailment, your "friend" is still liable for damages as he has a duty due care while the property is under his custody or control. Have your witness available for the trial or at least have an affidavit or other detailed statement given under penalty of perjury about all of the facts which the witness personally observed (heard from defendant at the time of the incident, saw, etc.) and your estimates from legitimate duly licensed auto transmission mechanics also.

Yes. You can sue him in small claims court for the damage.