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5 Things to Know When Giving a Car as a Gift

If you’ve been feeling extra generous or are in place where you can gift a car, it’s important to know that gifting a car is different than simply buying a car. First, you’ll want to make sure that the giftee can afford to pay for insurance, gas, maintenance and repairs. Giving a car as a gift is a responsibility for both parties. Knowing how to gift a car and understanding the proper protocol you need to follow goes much deeper than a trip to the dealership. Here are the five biggest things to know when you decide to gift a vehicle.

  1. You Must Own the Car Outright

    You can’t gift a car or transfer a title if you don’t own the car outright. If you have an outstanding balance on a loan, you will want to focus on paying it off. After it’s paid off reach out to the lender to ensure you’re good to go.

  2. Make Sure You Can Afford Gift Tax

    If you gift a car, you may be responsible for paying gift tax on it. Requirements can differ every year, so you’ll want to check to see the limit required for the tax. This tax can be between 18-40%

  3. Draft a Bill of Sale

    Without a bill of sale or contract, you could still be responsible for the car. To protect yourself, draft a bill of sale and make sure you and the giftee sign it. Your bill of sale should include:

  • Make and model of the car
  • Purchase price of the car
  • VIN
  • Odometer reading
    1. Transfer the Car Title

      To officially release ownership, you have to transfer the title. You can do this at the local DMV. It will require some paperwork and comes with a fee. Make sure to check with your state’s law to learn about the title transfers and fees.

    2. Keep the Car Insured

Of course, the giftee can’t legally drive the car unless they have it covered by car insurance. If they already have an auto insurance policy, they just need to call their insurance company or agent and add the vehicle to the current policy. If they don’t have car insurance, you can help them find a local Farm Bureau agent to get a policy with.

If you keep all of this in mind you can get your car gifted with little to no stress so you can enjoy giving!