“How to Navigate the Complexities of Gifting a Vehicle”

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Consider Your Giftee’s Financial Situation

Buying a car for someone is a generous gift, but it’s essential to consider the ongoing costs of car ownership. Your giftee will need to cover expenses such as fuel, insurance, maintenance, repairs, and annual registration. These costs can add up to thousands of dollars each year. It’s wise to discuss these financial responsibilities with your loved one to ensure they can manage them.

Understand Financing Options

If you plan to finance the vehicle, remember that you may need to be a co-owner on the title to secure an auto loan. Alternatively, you can purchase the car with cash or have the giftee apply for the loan with you as a cosigner. Consider how this financial commitment will impact your other financial goals and obligations.

Understand Title Requirements

Each state has specific laws regarding vehicle titles. If you’re gifting a car, you may need the giftee to sign off on the title. Communicate with the dealer early in the process to understand your options. If both names are on the title, consider using “or” or “and/or” to simplify future transactions.

Figure Out Insurance

Proof of insurance is typically required to complete the vehicle sale. If you plan to cover the insurance premiums, you can add the vehicle to your existing policy. If the giftee will get their own insurance, you may need to temporarily add the vehicle to your policy or obtain a binder from your insurance agent.

Remember Taxes

In addition to sales tax, you may be subject to the gift tax exclusion. In 2023, you can gift up to $17,000 (or $34,000 as a married couple) without reporting it to the IRS. The gift tax primarily affects wealthy taxpayers, and most people will only need to file an additional form on their tax return if they exceed the annual exclusion.

The Bottom Line

Gifting a car can be a wonderful gesture, but it’s crucial to understand the differences compared to buying a vehicle for yourself. Take the time to learn about the specific laws and logistics in your state, and consult with a local dealer for guidance.

For any mortgage service needs, call O1ne Mortgage at 213-732-3074. We’re here to help you with all your financing options and ensure you make the best decision for your financial future.

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