December 16th, 2019| The holiday season typically brings cooler temperatures, Christmas carols, and…car commercials. The holidays mean deals on new cars, and most car commercials feature shiny new models with big red gift bows on the roof. Most of us won’t be gifting the latest model from the dealership to a loved one this holiday season, but there are several reasons why you might want to gift a car to a friend or family member. For example, you may want to gift your old car to a young family member who recently got their license, or to help out a friend in need who may be struggling financially.
Steps to Gifting a CarThe most important step to gifting a car is having a frank discussion with the person who will be receiving the car before you do anything else. You may want the gift to be a surprise, but there is a very important reason why it should not be. Gifting a car is very generous, but the cost to buy a car is not the only expense associated with car ownership. If the person you are gifting the car to is unable to afford the cost of:
- auto insurance,
- maintenance and repairs,
- annual registration,
- and other fees,
If you are gifting a car you already own:First, you need to legally own the car. If you are still making payments on the car you want to gift, you will need to finish paying off the lien before you can gift the car, because the financial institution you took out the loan from is technically still the legal owner. Not sure if you are the legal owner or not? Check the vehicle’s title, which you should have received from the loan company after paying off the lien. If you can’t locate your title document, you can request an additional one from your local DMV after paying a replacement fee. Next, you will need to transfer the title. The person gifting the car will need to fill out the seller’s portion of the transfer section of the title, and the person receiving the car will need to fill out the buyer’s portion. In California, you will need to:
- Sign the title
- If lienholders are listed on the title, they will need to sign as well
- Fill in the odometer reading (if the car is less than 10 years old)
- Where the title asks for sales price, fill in “gift”
- Provide proof of smog certification (UNLESS you are giving the car to a family member or if the car is less than four years old and not diesel-powered)
- Complete a Statement of Use Tax Exemption form
- Complete a Statement of Facts form (UNLESS you are giving the car to a family member)
- Inform the DMV within 10 days of signing over ownership
- Have the gift recipient take the title to the DMV to register the vehicle in their name and pay the $15 title transfer fee.
If you are buying a new/used car as a gift:If you are buying a car to gift, you will have four main options.
- Purchase the vehicle outright and follow the steps outlined above.
- Take out a loan in your own name but register the title under both your name and the gift recipient’s.
- Bring the gift recipient with you to the dealership and co-sign a loan.
- Bring the gift recipient with you to the dealership, gift the down payment and have the gift recipient finance the vehicle themselves.