Gifting a Car this Holiday Season

What would be your ideal gift during the holidays from a loved one? Would it be your dream car, topped with a big red bow? According to research done by Motors, “nearly one-third of Americans have either gifted a vehicle to themselves or to someone else in celebration. . . [of the] holidays.” Often, January is the strongest month for vehicles sales.

Buying a car and gifting a car are two entirely different things. Gifting a car can also mean passing down your used vehicle to your teenager. If you plan on gifting a car this holiday season, what are the guidelines you need to know about? Making a plan is essential.

  • Before gifting a car to your son or daughter, all liens must be paid off. You will not be able to transfer ownership to your child until you have the title in hand.
  • When the lien is paid off, the lien holder will sign off on the transfer of ownership. This shows that the loans have been paid off.
  • Depending on the state, a title transfer is usually tax-free.
  • Depending on the state, the recipient of the title may need to be present to title the vehicle. Contact your local DMV to avoid issues while trying to plan gifting a car. Be specific with your questions about titling and registration.
  • You need immediate coverage on your car, or your rates are subject to increase.  Also, ensure your policy is adequate for the new vehicle. If you need to increase coverages, contact your insurance agent for any questions.
  • If you have part ownership of the vehicle, it’s easiest to put the vehicle on your current insurance policy. When gifting to your husband or wife, you may already have a shared policy, and all you’ll need to do is contact your insurance agent about adding the new car to your existing policy.
  • Watch out for federal gift tax. Giving gifts over a certain value triggers a federal gift tax. If the value is over $14,000, it will be considered a taxable income. The value includes any item gifted throughout the entire year. Gift taxes vary state by state, but are based off of: total purchase price, purchase price after trade-ins are accepted, purchase price after cash incentive. If a married couple is giving to an individual, the limit is $28,000. The tax obligations remain the same regardless of whether the giver and recipient are in the same family.


All the legal challenges you face will pay off when you see the look on the recipient’s face upon receiving your gift. The giant red bow is the cherry on top.

By: KayLynn P.

Be Confidently Insured.


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