Car with Ribbon

Buying a Car as a Present: Things to Think About

When you turn on the TV in the months leading up to the holidays, chances are you’ll see at least one commercial in which some lucky person is led outside by their parent, spouse or partner to find a brand-new car with a big red bow wrapped around it. Everybody rejoices, and the recipient of the gift jumps into the car and drives off into the sunset.

The whole scenario sounds perfect, doesn’t it? Not many of us would refuse a gift of a car, even if we already owned one. However, it’s important to realize that giving somebody a vehicle as a gift isn’t quite as straightforward as it looks on TV. Such a big purchase requires paperwork, as well as monetary and other considerations. Here are some things to think about:


Before the car officially belongs to the lucky recipient, the title must be put in the recipient’s name. If you are going the bow-around-the-roof surprise route to give the car to the recipient, this means you likely already had to purchase the car in your own name (or you already own it), and you must transfer the title. Refer to your state’s Department of Motor Vehicles for the proper procedure in that case. However, if you’re going to take the recipient to the dealership for the big surprise, you may be able to avoid that extra step by having the title put in the recipient’s name in the first place.

The car also must be registered with the state, and it also must be covered under a car insurance policy with limits that meet your state’s minimum requirements.


Another thing to think about when planning your four-wheeled gift is the fact that there may be financial repercussions beyond the price of the car and any sales tax. For example, in many cases, you, as the person giving the gift, may be required to pay a federal gift tax. According to the IRS, “Gift taxes apply to an individual, either directly or indirectly, where full consideration (measured in money or money’s worth) is not received in return.” So, keep this in mind when budgeting for the gift.

You should also consider the costs of insurance premiums — and who will pay them. Are you giving the gift of auto insurance to cover your loved one’s new car? Or, will the recipient pay his or her own auto insurance premiums? Are you sure that he or she can afford to do so? Either way, it might be a good idea to get a car insurance quote so you know how much the premiums may cost.

Other expenses to think about are fuel costs, parking fees (if the recipient’s residence only has paid parking, for example) and maintenance costs.

It’s essential to take all of these aspects into account before deciding to give a vehicle as a present. Make sure that you fully understand the recipient’s situation and make choices that are lifestyle- and budget-appropriate. Even if that means consulting with the recipient and “ruining” the surprise, at least you’ll be sure the gift is welcome — and doesn’t create a burden.

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