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How to Give a Car as a Gift

It is the stuff of legend, at least according to car commercials. Giving a vehicle as a gift does happen but how do you go about it? Who pays the insurance? How do you even keep it a secret? This article will help you with the ins and outs of insuring a gifted vehicle. Luckily the process is relatively simple and there are a few different ways you can go about making it happen. This article will also cover donating and gifting your vehicle to a family member but the bulk is about gifting a new car.

How to give a car as a gift

Let's start with the purchasing. Purchasing a car for someone else seems daunting because they have to sign the paper work. They still do, but often will sign the paperwork after the gift is given, and the giver will either sign for the car initially, if their credit is good, or get a line of credit. Both of these steps are relatively painless. The only extenuating circumstance would come with a previously unpaid loan. That may cause a bit of a hiccup in your plan but again it's easily dealt with. It might take a moment to find a dealership that can work with your needs with regard to keeping the gift a secret.

The title can also be taken care of at the dealership as they will very easily be able to print that material and have ready when the recipient of the gift signs the rest of the paperwork. There are a few minor nit-picky aspects aside when purchasing a vehicle and giving it as a gift. Gift tax in some states will add between 18 and 40 percent. You will also need to get your bill of sale squared away but as I said these are routine things that for the most part occur anytime you purchase a vehicle. The difference here is when the recipient signs the paperwork.

Car insurance for the surprise vehicle

The biggest hurdle is of course insurance. Without insurance a vehicle isn't legal to drive, and this will need to be taken care of prior to the vehicle’s delivery. There are three different ways to get insurance on a new vehicle.

First and foremost, you can simply add the vehicle to an existing policy. In most cases this is as simple as logging onto an app or giving an insurance provider a call. If you are married this is the easiest thing in the world and you can keep it a secret provided your insurance agent doesn't spill. If you aren't married to the recipient you can get temporary insurance through the dealership. This method could be more expensive but might work for you. As with any vehicle it is wise to get an idea of what the rate will be based on the MSRP.

Another method is to add the vehicle after the fact. Some policies have an automatic insurance clause that allows between fourteen and thirty days to insure the vehicle. The vehicle in this scenario would still have to be added before the deadline laid out by your insurer. However, it gives you a bit of time before a second car shows up on the bill if you're sharing finances. It might go without saying but just in case, don't assume you are covered. Always check with your insurer or agent to cover all your bases.

The third method is called bind and delay. This is relatively easy to do but requires a bit of prep. You call your agent or insurer and let them know that you will be purchasing the vehicle but don't want to sign documents or have anything show until after the gift is delivered. You can preset the day coverage begins and have your bases covered that way. Again, double check with your insurer because this is likely offered but might not be for whatever reason.

There are dozens of tiny ways to keep things a secret until the great reveal but it's not going to be a cake walk. The idea here is to dot all your I's and cross all your T's before the vehicle is delivered and with some prep you can makes sure none of the paper work arrives until after the date of the gift’s delivery leaving the recipient with no clue about what is happening.

The tone of the article assumes a certain relationship between the giver and the giftee, but there are also instances where some will either gift a vehicle to a family member in need, or will donate it to a charity. Gifting a family member is as easy as having them sign the title however there is still a registration fee which varies from state to state for a gifted vehicle. Simply check with your DMV about the fees for title transfer and registration.

Donating a vehicle can lead to a tax deduction. Generally, the car will be auctioned off or given away for free to someone in need. How much you can claim will vary from state to state and your local tax code but if the vehicle was used for non-profit reasons before donating it you can claim full market value for the vehicle. Again, check for local laws and tax codes as they may change or be slightly different where you live.

There are some other hidden benefits to gifting a vehicle and one of the is a nice tax deduction. There are some cons to gifting a vehicle and largely it has to do with uncertainty. The paperwork and logistics aside, there is always the possibility that the recipient of the gift damages the vehicle, that is in some fashion your responsibility.

There are minor cons to gifting or donating your vehicle. You're out the money you could have gained from selling it and often the tax deductible isn't large for a donated or gifted vehicle. However, it's up to your individual needs, and the needs of your family, how you choose to conduct your gift giving business.

Gifting a car is a bold statement and whether you are donating a used vehicle to a charity or purchasing a new sport SUV for your spouse it's sure to be appreciated.


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