How to Buy a Car as a Gift

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Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


, - August 24, 2021

It’s possible to give a car as a gift, but there are different rules surrounding this depending on if the vehicle is new or used, financed, or bought with cash. If you intend to gift someone a car, here's how to do it.

Select a Car Carefully

When you're not the intended driver of a car you're choosing, you have to make a lot of considerations for the other person's needs. There's no return policy on vehicles, so once you sign the paperwork, the deal is sealed.

This means that if you're of average height, but purchasing a car for your son who's 6'4", what feels like a lot of headroom to you, might be too cramped for him. You also need to consider whether the recipient will be able to keep up with the cost of maintaining a vehicle including insurance, registration, fuel, and regular service.

Additionally, you need to consider the cost of giving a car as a gift – in some cases, gifting big-ticket items such as cars means paying a gift tax. The cost of the car determines whether or not you have to pay.

Car Gifts and Taxes

In many cases, you won't have to pay a gift tax on a vehicle unless it costs more than the U.S. gift exclusion limit. This is the amount an individual is allowed to give another individual – up to $15,000 to a single person or $30,000 for a married couple – without the worry of paying additional taxes.

However, if you do gift more than this amount to one person, you usually pay tax on the amount which exceeds it. You have to file taxes for each gift that exceeds $15,000, but this doesn't necessarily mean you're going to owe taxes.

For example, if you buy a $25,000 vehicle for your boyfriend, you're going to be paying taxes on $10,000 of it's value ($25,000 - $15,000 allowed exemption = $10,000). Gift taxes currently sit at between 18% and 40%, which varies by state and other factors. In most cases, the giver pays the gift tax, but in some cases, a recipient may choose to be the one who pays it. Check with a tax professional to see what's allowed for your situation.

Financing a Vehicle as a Gift

If you're financing a car to give to someone else there are a few options. Typically, you have to put the vehicle in your own name or have the intended recipient come with you to be a cosigner or joint applicant.

Many states don't allow the financing of a car to anyone other than the intended driver, so it's important to find out the rules in your state before you decide how to proceed. If you don't intend to stay on the loan with the intended recipient, you need to make sure that they qualify for financing so that they can refinance the vehicle into their name.

If you intend to buy the car as a surprise, it's worth talking to the dealer about it. This way they can help you navigate any tricky regulations you may not know about, and you can ensure the surprise isn’t ruined by mistake. In the case of a surprise, the only way you can finance is to put it in your name. You can then register both of you as drivers.

It's not always possible to buy a car for someone as a gift, but if you already own a vehicle you may be able to give it to someone as a gift. In order to give a used car that you already own to someone, gift tax still applies.

Taking Care of Details

In either case, make sure you protect yourself and the gift recipient by drawing up a bill of sale that includes the year, make, model of the car, the original purchase price of the vehicle, the VIN, and the odometer reading at the time of gifting. After this, you and the giftee can head to the DMV or Secretary of State to transfer the title into their name or register it in one or both of your names.

This often entails doing some paperwork and paying a fee, but both vary by state. Remember, if your giftee isn't licensed and insured, they won't be able to register or legally drive the vehicle.

Ready to Get Gifting?

If you're ready to look for financing on a vehicle for someone else, or if you're looking for another car loan after gifting your vehicle, we want to help. Here at CarsDirect, we work with a nationwide network of special finance dealerships that can help consumers in many kinds of credit situations.

Let us help take the stress out of searching for a local dealer with the lending resources you need. Just fill out our no-obligation car loan request form. It's fast and free, so get started right now!

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Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


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