Today’s cars have an average lifespan of about 150,000 miles, which is equivalent to eight years. Sometimes, however, cars last longer than that. On other occasions, we tire of them before the vehicle has reached its maximum lifespan. Sometimes, you want to get rid of your car with a bad engine, as you have a family member that can fix it.

When it is time to move on from a car, many have found that gifting the car to a loved one is a great way to get rid of the vehicle, while helping out a family member in need.

This article will explore how to give your car away to a family member or other loved one.

How to Give a Car Away to a Family Member

Before you decide to give your car away, be sure to check into any unique requirements in the state in which you live. Circumstances can vary depending on the owner of the vehicle, and who the car is going to. So, be sure to do your homework on any requirements before moving forward.

It is also essential to understand the needs and wants of the intended recipient of the car. You will need to ensure that they can afford insurance, that they will not be offended by your generosity, and that they can keep up with future maintenance. Further, you need to ensure the recipient will be able to cover taxes associated with the vehicle transfer.

Pay Off Your Car Loan First

If you currently owe money on the vehicle, you must pay off the car first. In most cases, if your car was financed, you will need to obtain a lien release. A lien release is provided by your lender and indicates that you have satisfied your loan requirements.

Consider the Gift Recipient’s Financial Situation

As mentioned previously, you must consider the situation of the person you plan to gift the car to. Car ownership comes with a variety of costs. Therefore, ensure that the gift recipient will have the financial means to pay for gas, car maintenance and repairs, and vehicle insurance. If they are unable to afford these car-related necessities, you may want to reconsider if giving them a car is the right thing to do.

Make Sure to Pay Gift Tax 

Gift tax on a car donation can range from 18% to 40%. Requirements change every year, however, so make sure that you look into your specific situation. The gift tax is based on the fair market value of the car. The fair market value can be determined by using the Kelley Blue Blook, NADAGuides, or Edmunds.

In 2019, as an example, it was possible to gift up to $15,000 within a year without worrying about gift tax.

Don’t Worry about Sales Tax

A cool perk related to gifting a car is that you won’t have to pay sale tax if you already own the car. Though car taxes can vary, it is not a small dollar amount. Thus, your gift recipient, nor you, will have to worry about paying sales tax tied to the gift.

car, automobile, motor

Write Up a Bill of Sale

Even if planning to gift the vehicle to a family member or friend, it is important to write up a bill of sale. The bill of sale is a document that transfers the ownership of an item from the giver to the receiver, or from the owner to the purchaser. The bill of sale should include the following key bits of information:

  • Make of the car
  • Model of the car
  • Year the car was manufactured
  • Purchase price of the car
  • Vehicle identification number (VIN)
  • The odometer reading of the car

When gifting a car, it is common practice to indicate that the purchase price is $1.00.

Transfer the Title of the Car 

A critical step when gifting a car is to pay a visit to your local Department of Motor Vehicles (DMV) office. During this visit, you will transfer the title of the car. Thus, be sure to have the title, any lien release documentation, etc., so that you can properly complete the required paperwork for the title transfer. Different states will have their laws and fees related to title transfers.

Make sure the Gift Recipient has Insurance

Your family member will not be able to drive the car without the proper car insurance legally. Getting car insurance is relatively easy these days. They can simply place a call to one of the large insurance firms or seek out insurance online through one of the hundreds of legitimate insurance providers.

Ensure that the family member can show you valid proof of insurance before they drive the car away.

The Bottom Line 

Gifting a car is a relatively straightforward process. However, it requires more than a big red gift bow sitting on the hood of the car, and a fancy set of car keys. Giving a car is a gift to a family member or loved one can be life-changing for the recipient. Thus, take the time to ensure that your loved one can accept the car and take ownership of the associated responsibilities. If they can do so, both the giver and receiver will feel great about the transaction.