How to gift a car

Gifting someone with a car is a strong move. Toss one of those big red bows on it, and you’ve officially won the day. But while a car is a great present, it can be an unwanted hassle for you and your recipient if you’re not prepared.

Questions to ask before giving someone a car

Before you pull the trigger on such a substantial purchase, think about your recipient’s needs.

Do they actually want a car?

Before you even think about buying a car for someone, ask yourself whether they even want it in the first place. While your motives might be genuine, some people just don’t want or need to drive. If they live in a city like New York, for example, you may be giving the gift of gridlock and parking problems.

What type of car do they want?

If you know the car they want, make sure you also know the type. Sure, it’s the thought that counts. But do you want to throw thousands down on a vehicle only to see your giftee’s joy fade when they see you bought them something different from what they asked for?

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Should you take them to the dealer?

If you know the type of car they’re after, consider taking them along to a dealership for their final say on the trim specs. You can also buy the car and insurance in their name to save yourself the added stress of transferring a title.

Who will pay for the car?

Ask yourself if you can afford to shell out for the entire cost of a car and if the person you’re giving the car to can afford to insure and maintain it. Some high-end cars not only have an expensive price tag, but also cost a lot to insure.

If you’re buying a car for your significant other and you have a shared bank account, you may want to look at paying in cash or getting a car loan so you can keep the gift a secret.

Which new cars offer the best holiday discounts?

At the end of the year, most car brands promote holiday deals on the current year’s models, including discounts, cashback offers, financing bonuses and 0% interest deals.

Check with your local dealership to learn if the car you’re considering gifting will be on sale over the holidays. Typical offers include 0% financing, rebates and discounts from $2,000 to $9,000.

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How do I insure a car in someone else’s name?

Because you’re buying the car as a gift, you’ll want to insure it in the recipient’s name. Whether you pay for the coverage is up to you, but you’ll likely need to have it in place before driving the car off the lot.

If the driver doesn’t have existing coverage, you have two main options:

1. Take them to the lot with you. This way, both the title of ownership and the insurance can go directly in their name when you buy the car.
2. Buy the car and transfer ownership. When you’re transferring the title, make it clear it’s a gift, or you could be on the hook for taxes, depending on your state.

How long do I have to insure a car after buying it?

If you already have insurance for another vehicle, your provider may offer you temporary coverage for the new one. Periods can be anywhere from a couple of days up to an entire month, so check your policy and your state’s requirements to see what kind of grace period you have.

Also consider where you live, as extension coverage can vary widely by state.

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How do I transfer a gift car title?

Transferring the title of a car depends on where you live. If you’re buying new, the dealership should handle most of the paperwork.

In most states, you should:

• Look up local requirements on transferring car titles in your state.
• Head to your local DMV.
• Hand over your signed and completed title that includes info like the odometer and damage disclosures.
• Show proof of insurance.
• Complete a title application or vehicle registration form.
• Fill out the Statement of Transaction, including a note that it’s a gift.
• Pay the title fee — typically under $20 — and any other costs.

Car title requirements by state

You typically have 30 days to transfer a title and will pay less than $15. Compare the title transfer grace period and fees for your state.

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How often do people give cars as gifts?

According to an Edmunds report, December is often the month with the most new car sales for luxury makes like BMW, Mercedes and Lexus. Gifted cars could be anywhere from 1% of December car sales, according to an article from automotive news outlet The News Wheel, or as much as 10% for luxury cars, according to The New York Times.

How to present a car as a gift and keep it a secret

There’s no wrong way to wrap up a car, though putting a giant red bow on top is a classic. You could also put the keys in a jewelry box, though you could inadvertently dash expectations if you’re gifting it to your partner and you’re not married.

Consider the lucky giftee’s personality and what they’d respond to the most. You’ll find few wrong turns when giving the gift of a car.

Keeping the car a secret is another matter, one you might need an accomplice’s help. Ask the dealership if they deliver, or see if you can leave the car at a friend’s house and drive it over Christmas morning. Park it around the block or keep them from going outside until you’re ready for the big reveal.

How to give a car for Christmas

If you’ve already figured out who’s responsible for gas, insurance and any other costs, all that’s left is the fun part.

If you want the car to be the first present they get, put the keys in your recipient’s stocking. If the plan is to save the best for last, wrap the keys and don’t give them the box until every other present is opened. And if you’re feeling a little mischievous, hide the keys in the Christmas tree and let them know they’ll need to find their last present.

How to give a car as a birthday gift

If the car is a sweet sixteen present for anyone other than your own child, make sure you get permission from their parents. It’s also a good idea to figure out who’s responsible for gas and insurance. Keep in mind that teenagers are notoriously expensive to insure, so it’s worth researching which cars will have the best rates.

Once everything is figured out, one fun way to drop the surprise is to bring the car to their driving test. But wait until after they pass to gift the car — nobody needs the stress of taking their exam in an unfamiliar vehicle.

If the car is a present for any other birthday, a fun way to surprise your recipient is to put the keys in a box and wrap them. Just make sure to sneak the car into the driveway while they’re sleeping.

How to give a car for graduation

Many universities don’t allow freshmen living on campus to bring cars. If your recipient is heading off to college, check if they’ll be able to park their car near the dorms, and that they’ll be able to pay for insurance, gas and a parking pass.

If you have the all-clear, a classic way to surprise your graduate is to leave the car in the parking lot outside of the graduation ceremony with the big red bow on top. Aside from the surprise factor, you’ll also get a great photo op of your graduate in their cap and gown with the car.

Bottom line

Gifting a car can be a thoughtful gift for a close friend or family member, but it comes with some risk. Considering taking care of the title and insurance with a current insurer or by purchasing a new policy.

Frequently asked questions about gifting cars

• What if they don’t like the car?

  New cars depreciate as soon as they’ve left the lot, and most new and used car dealers don’t offer returns. Before buying anything, make sure your recipient actually wants a set of wheels. And ask about return options.

  A local dealership might be willing to work out a deal if there’s a simple fix or you chose the wrong trim or color. One Hyundai dealership in Florida offers a three-day money-back guarantee, for instance.

• Is the gift of a car taxable?

  It could be, depending on where you live and how much the car is worth. Talk with a tax professional to learn more. Typically you can give a car to a friend or family member if the car’s worth less than $15,000, or $30,000 for a married couple, according to the IRS.

• Should I take out a loan to pay for a gift car?

  If you have a joint account and you’re buying the car for your partner, taking out a loan to pay for the vehicle is one way to ensure they don’t find out before the unwrapping. It can also be useful if you don’t have a lot of cash on hand.